QUESTION 3 The Royale Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHS). The company recorded the following data relating to manufacturing overhead for September: Number of units completed. hours per unit Quantity variance. applied fixed overhead cost in the company's overhead budget for September was: O $45,900 O $54,768 O $49,920 O $47,703 31,200 units: Standard direct labor- $51,300; $0.85 per DLH. The amount of 1.6 DLHS; Denominator activity 54,000 DLHS; Actual fixed overhead costs incurred $3,468 Unfavorable; Fixed portion of the predetermined overhead rate
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.
Fixed overhead costs seem to be expenditures that do not fluctuate even though the level of manufacturing activity fluctuates. Fixed costs are usually reasonably predictable as well as fixed overhead costs seem to be important to keep a firm working effectively.
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