Assume that the cost formula for one of a company’s variable expenses is $4.80 per unit. The company’s planned level of activity was 2,000 units and its actual level of activity was 2,190 units. The actual amount of this expense was $10,800. The activity variance for this expense is:
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.
Assume that the cost formula for one of a company’s variable expenses is $4.80 per unit. The company’s planned level of activity was 2,000 units and its actual level of activity was 2,190 units. The actual amount of this expense was $10,800. The activity variance for this expense is:
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