A firm uses machine hours to allocate overhead cost. During the period, budgeted variable overhead is Rs. 10000 and budgeted machine hours is 100 hours for budgeted volume of 1000 units. The firm produced 1200 units consuming 150 hours and spent Rs. 15000 towards variable overhead. The total variable overhead cost variance is Rs. 3000 favorable Rs. 5000 favorable Rs. 5000 adverse Rs. 3000 adverse
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.
A firm uses machine hours to allocate
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