Addis manufacturing uses a standared costing system and its fiscal year ends july 31. Variable overhead for July 1997 was budgeted at $ 4 per machine hour. Budgeted fixed overhead in July 1997 was $ 240,000, Addis has budgeed 200,000 units of output for July 1997. Machine hour is the allocation base for variable and fixed overhead costs. Machine hour is budgeted to be 0.5 hour unit of out put. the actual number of units produced for the month is 192,000 with a total machine hour of 57,600. The actual variable and fixed overhead costs for the month are $ 120,000 and $ 256,800 respectively. Compute: 1) Variable factory overhead efficiency variance 2) Variable factory overhead spending variance 3) Fixed factory overhead spending variance 4) Production-volume variance
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.
Addis manufacturing uses a standared costing system and its fiscal year ends july 31. Variable
Compute:
1) Variable factory overhead efficiency variance
2) Variable factory overhead spending variance
3) Fixed factory overhead spending variance
4) Production-volume variance
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
