ABC Company listed the following data for the current year: Budgeted factory overhead $1,048,800 Budgeted direct labor hours 69,000
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.
ABC Company listed the following data for the current year:
| Budgeted factory |
$1,048,800 | ||
| Budgeted direct labor hours | 69,000 | ||
| Budgeted machine hours | 20,000 | ||
| Actual factory overhead | 1,037,600 | ||
| Actual labor hours | 72,000 | ||
| Actual machine hours | 19,500 | ||
Assuming ABC Company applied overhead based on direct labor hours, the company's predetermined overhead rate for the year is:
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