At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $9,800 and that the associated rate variance was $200 unfavorable. If 8,000 machine-hours were actually worked during July, the budgeted maintenance cost per machine-hour was:
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.
At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $9,800 and that the associated rate variance was $200 unfavorable. If 8,000 machine-hours were actually worked during July, the budgeted maintenance cost per machine-hour was:
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