Bursey Company uses a standard cost system. Manufacturing overhead is applied to units of product on the basis of direct labour-hours allowed for the actual output of the period. Total budgeted fixed overhead cost for the year $ 10,000 Actual fixed overhead cost for the year $ 10,400 Budgeted standard direct labour-hours 2,000 Actual direct labour-hours 2,400 Standard direct labour-hours allowed for the actual output 2,500 1. Compute the fixed portion of the predetermined overhead rate for the year. 2. Compute the fixed overhead budget, volume and total variances.
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.
Bursey Company uses a
| Total budgeted fixed overhead cost for the year | $ 10,000 | |||||
| Actual fixed overhead cost for the year | $ 10,400 | |||||
| Budgeted standard direct labour-hours | 2,000 | |||||
| Actual direct labour-hours | 2,400 | |||||
| Standard direct labour-hours allowed for the actual output | 2,500 |
1. Compute the fixed portion of the predetermined overhead rate for the year.
2. Compute the fixed overhead budget, volume and total variances.
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