Chaumat Co's performance report for last month shows that actual indirect materials cost, a variable cost, was $29,800. In addition, the spending variance for indirect materials was $2,200 favourable. During that month, the company worked 8,000 machine-hours. Budgeted activity for the month had been 8,200 machine-hours. The budgeted cost per machine-hour for indirect materials must have been closest to: $3.91. $3.63. $3.73. $4.00.
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.
Chaumat Co's performance report for last month shows that actual indirect materials cost, a variable cost, was $29,800. In addition, the spending variance for indirect materials was $2,200 favourable. During that month, the company worked 8,000 machine-hours. Budgeted activity for the month had been 8,200 machine-hours. The budgeted cost per machine-hour for indirect materials must have been closest to:
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