A manufacturing company operates a standard absorption costing system. Last month 25,000 production hours were budgeted and the budgeted fixed production cost was $125,000. Last month the actual hours worked were 24,000 and standard hours for actual production were 27,000. What was the fixed production overhead capacity variance for last month? A $5,000 Adverse B $5,000 Favourable C $10,000 Adverse D $10,000 Favourable
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 manufacturing company operates a
production hours were budgeted and the budgeted fixed production cost was $125,000. Last month the
actual hours worked were 24,000 and standard hours for actual production were 27,000.
What was the fixed production
A $5,000 Adverse
B $5,000 Favourable
C $10,000 Adverse
D $10,000 Favourable
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