Compute the fixed portion of the predetermined overhead rate for the year. Compute the fixed overhead budget and volume 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.
Salado Company has a
Total budgeted fixed overhead cost for the year $300,000
Budgeted standard direct labour-hours (denominator level of activity) 50,000 Hours
Actual direct labour-hours 49,000 Hours
Standard direct labour-hours allowed for the actual output 48,000 Hours
Actual fixed overhead cost for the year $295,500
Required:
- Compute the fixed portion of the predetermined overhead rate for the year.
- Compute the fixed overhead budget and volume variances.
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