Centre Black Company planned to produce 40,000 units of product and work at the 100,000 direct labour hours level of activity for 2020. Manufacturing overhead at this level of activity and the predetermined overhead rate is as follows: Predetermined Overhead Rate per Direct Labour Hour Variable manufacturing overhead $600,000 Fixed manufacturing overhead Total manufacturing overhead 300,000 $6 a) Variable overhead budget variance. b) Fixed overhead volume variance. 3 $900,000 At the end of 2020, 44,000 units were actually produced and 107,400 direct labour hours were actually worked. Total actual manufacturing overhead costs were $950,000, of which $610,000 was variable. Instructions Calculate the following variances and indicate whether they are favourable or unfavourable: $9
Centre Black Company planned to produce 40,000 units of product and work at the 100,000 direct labour hours level of activity for 2020. Manufacturing overhead at this level of activity and the predetermined overhead rate is as follows: Predetermined Overhead Rate per Direct Labour Hour Variable manufacturing overhead $600,000 Fixed manufacturing overhead Total manufacturing overhead 300,000 $6 a) Variable overhead budget variance. b) Fixed overhead volume variance. 3 $900,000 At the end of 2020, 44,000 units were actually produced and 107,400 direct labour hours were actually worked. Total actual manufacturing overhead costs were $950,000, of which $610,000 was variable. Instructions Calculate the following variances and indicate whether they are favourable or unfavourable: $9
Chapter1: Financial Statements And Business Decisions
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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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Transcribed Image Text:Centre Black Company planned to produce
40,000 units of product and work at the
100,000 direct labour hours level of activity for
2020. Manufacturing overhead at this level of
activity and the predetermined overhead rate is
as follows:
Predetermined
Overhead Rate per
Direct Labour Hour
Variable manufacturing
overhead
$600,000
Fixed manufacturing
overhead
300,000
$6
a) Variable overhead budget variance.
b) Fixed overhead volume variance.
3
Total manufacturing
overhead
$900,000
At the end of 2020, 44,000 units were actually
produced and 107,400 direct labour hours were
actually worked. Total actual manufacturing
overhead costs were $950,000, of which
$610,000 was variable.
Instructions
Calculate the following variances and indicate
whether they are favourable or unfavourable:
$9
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