Assume that a company uses a standard cost system and applies overhead to production based on direct labor-hours. It provided the following excerpt from the standard cost card of its only product: Standard HoursStandard RateStandard CostFixed manufacturing overhead2 hours$5.50 per hour $11.00 During the most recent period, the following additional information was available: • The total budgeted fixed overhead was $285,000 • The fixed overhead volume variance was $4,200 F How many units were produced during the period?
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.
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