a Manufacturers Co. has the following details for the variable overheads on its product MM7 for the year to 31st March 2022. Each MM7 was expected to take three labour hours and variable overheads were expected to be £4.25 per labour hour. The company expected to make and sell 200,000 units of MM7. Budgeted fixed overheads were £25,000. In fact, in the year ended 31s March 2022 the company made 180,000 MM7s using 630,000 labour hours. The actual cost of variable overheads was £2,800,000 and fixed overheads £23,000. Required: Calculate the following variances for Mercia Manufacturers Co. for the year ended 31st March 2022: i. variable overhead expenditure variance ii. variable overhead efficiency variance ii. fixed overhead expenditure varianc
a Manufacturers Co. has the following details for the variable overheads on its product MM7 for the year to 31st March 2022. Each MM7 was expected to take three labour hours and variable overheads were expected to be £4.25 per labour hour. The company expected to make and sell 200,000 units of MM7. Budgeted fixed overheads were £25,000. In fact, in the year ended 31s March 2022 the company made 180,000 MM7s using 630,000 labour hours. The actual cost of variable overheads was £2,800,000 and fixed overheads £23,000. Required: Calculate the following variances for Mercia Manufacturers Co. for the year ended 31st March 2022: i. variable overhead expenditure variance ii. variable overhead efficiency variance ii. fixed overhead expenditure varianc
Chapter1: Financial Statements And Business Decisions
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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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Mercia Manufacturers Co. has the following details for the variable overheads on its product MM7 for the year to 31st March 2022. Each MM7 was expected to take three labour hours and variable overheads were expected to be £4.25 per labour hour. The company expected to make and sell 200,000 units of MM7. Budgeted fixed overheads were £25,000. In fact, in the year ended 31s March 2022 the company made 180,000 MM7s using 630,000 labour hours. The actual cost of variable overheads was £2,800,000 and fixed overheads £23,000. Required: Calculate the following variances for Mercia Manufacturers Co. for the year ended 31st March 2022: i. variable overhead expenditure variance ii. variable overhead efficiency variance ii. fixed overhead expenditure variancMercia Manufacturers Co. has the following details for the variable overheads on its product MM7 for the year to 31st March 2022. Each MM7 was expected to take three labour hours and variable overheads were expected to be £4.25 per labour hour. The company expected to make and sell 200,000 units of MM7. Budgeted fixed overheads were £25,000. In fact, in the year ended 31s March 2022 the company made 180,000 MM7s using 630,000 labour hours. The actual cost of variable overheads was £2,800,000 and fixed overheads £23,000. Required: Calculate the following variances for Mercia Manufacturers Co. for the year ended 31st March 2022: i. variable overhead expenditure variance ii. variable overhead efficiency variance ii. fixed overhead expenditure variance
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