Exhibit 8-4 Columnar Presentation of Integrated Variance Analysis: Webb Company for April 2014 PANEL A: Variable (Manufacturing) Overhead Flexible Budget: Budgeted Input Quantity Allowed for Allocated: Budgeted Input Quantity Allowed for Actual Costs Incurred: Actual Output x Budgeted Rate Actual Input Quantity x Actual Rate (1) Actual Input Quantity x Budgeted Rate (2) Actual Output x Budgeted Rate (4) (3) (0.40 hrs./unit x 10,000 units x $30/hr.) (4,000 hrs. x $30/hr.) $120,000 (0.40 hrs./unit x 10,000 units x $30/hr.) (4,000 hrs. x $30/hr.) $120,000 (4,500 hrs. x $29/hr.) $130,500 (4,500 hrs. x $30/hr.) $135,000 $4,500 F $15,000 U Efficiency variance Never a variance Spending variance $10,500 U Rexible-budget variance Never a variance $10,500 U Underallocated variable overhead (Total variable overhead variance) PANEL B: Fixed (Manufacturing) Overhead Flexible Budget: Same Budgeted Lump Sum (as in Static Budget) Regardless of Output Level (3) Same Budgeted Lump Sum (as in Static Budget) Regardless of Output Lovel Allocated: Budgeted Input Quantity Allowed for Actual Costs Incurred Actual Output x Budgeted Rate (1) (2) (0.40 hrs./unit x 10,000 units x $57.50/hr.) (4,000 hrs. x $57.50/hr.) $230,000 $276,000 $285,000 $276,000 $9,000 U $46,000 U Spending variancer Never a variance Production-volume variance $9,000 U Rexible-budget variance $46,000 U Production-volume variance $5,000 U Underallocated fixed overhead (Total fixed overhead variance) "F = favorable effect on operating income; U = unfavorable effect on operating income.
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.
Straightforward 4-variance
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