Chart Hills Company makes customized golf shirts for sale to golf courses. Each shirt requires 3 hours to produce because of the customized logo for each golf course. Chart Hills uses direct labor-hours to allocate the overhead cost to production. Fixed overhead costs, including rent, depreciation, supervisory salaries, and other production expenses, are budgeted at $28,500 per month. The facility currently used is large enough to produce 5,000 shirts per month. During March, Chart Hills produced 4,200 shirts and actual fixed costs were $28,000. Q. Calculate the fixed overhead spending variance and indicate whether it is favorable (F) or unfavorable (U).
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.
Chart Hills Company makes customized golf shirts for sale to golf courses. Each shirt requires 3 hours to produce because of the customized logo for each golf course. Chart Hills uses direct labor-hours to allocate the
Q. Calculate the fixed overhead spending variance and indicate whether it is favorable (F) or unfavorable (U).
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