Deems company's budgeted fixed factory overhead cost is 50,000 per month plus a variable overhead rate of 4 per direct labour hour. The standard direct labor hours allowed for November production was 18,000. An analysis of the factory overhead indicates that in November, Deems had an unfavorable budget (controllable) variance of 1,000 and a favorable volume variance of 500. Deem uses a two way analysis of overhead variance. The actual factory overhead meadured in November is:
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.
Deems company's budgeted fixed
The actual factory overhead meadured in November is:
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