A company uses job-order costing and allocates costs using direct labor hours as the cost driver. At the beginning of the year, the company had estimated the following: Estimated total overhead cost: $860,000 Estimated total direct labor hours: 860 hours At the end of the year, the company's actual results indicated the following: Actual total overhead cost: Actual direct labor hours: $673,200 68 hours
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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