Fact Pattern: Tiny Tykes Corporation had the following activity relating to its fixed and variable overhead for the month of July: Actual costs Fixed overhead $120,000 Variable overhead 80,000 Flexible budget (Standard input allowed for actual output achieved x budgeted rate) Variable overhead 90,000 Applied (Standard input allowed for actual output achieved x budgeted rate) Fixed overhead 125,000 Variable overhead spending variance 2,000 F Production volume variance 5,000 U Question Tiny Tykes' fixed overhead efficiency variance 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.
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