A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 3.90 direct labor-hours Standard variable overhead rate $11.25 per direct labor-hour The following data pertain to operations for the last month:
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 that has only one product has established the following standards for its variable manufacturing
| Standard hours per unit of output | 3.90 | direct labor-hours |
|---|---|---|
| Standard variable overhead rate | $11.25 | per direct labor-hour |
The following data pertain to operations for the last month:
| Actual direct labor-hours | 8,800 | direct labor-hours |
|---|---|---|
| Actual total variable |
$ 95,850 | |
| Actual output | 2,200 | units |
What is the variable overhead rate variance for the month?
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