apply standard factory overhead cost to outputs: Actual total factory overhead cost incurred $ 28,000 Actual fixed overhead cost incurred $ 7,000 Budgeted fixed overhead cost $ 10,000 Actual machine hours 8,000 Standard machine hours allowed for the units manufactured 5,500 Denominator volume—machine hours
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.
The following information for the past year is available from Gas Company, a company that uses machine hours to apply standard
| Actual total factory overhead cost incurred | $ 28,000 |
|---|---|
| Actual fixed overhead cost incurred | $ 7,000 |
| Budgeted fixed overhead cost | $ 10,000 |
| Actual machine hours | 8,000 |
| Standard machine hours allowed for the units manufactured | 5,500 |
| Denominator volume—machine hours | 5,500 |
| Standard variable overhead rate per machine hour | $ 3 |
The variable factory overhead efficiency variance is:
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$7,500 unfavorable.
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$8,300 unfavorable.
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$9,000 favorable.
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$8,400 favorable.
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$7,900 favorable.
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