Deems Company's budgeted fixed factory overhead costs are $50,000 per month plus a variable factory overhead rate of $4.00 per direct labor 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. Deems uses a two-way analysis of overhead variance. The applied factory overhead in November is: 122,500 123,000 122,000 121,000
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 applied factory overhead in November is:
122,500
123,000
122,000
121,000
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