Adom company uses a standard cost system for its production process and applies overhaed based on direct labour hours. The following information is available for may when Adom produced 4500 units: Standard: DLH per Unit-Ghc 2.50, variable overheards per DLH-GHC1.75, the fixed overhead per DLH-GHC3.10. Budgeted variables overaheads-ghc 21.875. Budgted fixed overhead-GHc 38.750. Actual- Direct labour hours- 10000, variable overheads ghc 26.250. Fixed overhead Ghc 38000. what is the variable overhead effieciency 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.
Adom company uses a standard cost system for its production process and applies overhaed based on direct labour hours. The following information is available for may when Adom produced 4500 units: Standard: DLH per Unit-Ghc 2.50, variable overheards per DLH-GHC1.75, the fixed overhead per DLH-GHC3.10. Budgeted variables overaheads-ghc 21.875. Budgted fixed overhead-GHc 38.750. Actual- Direct labour hours- 10000, variable
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