Fixed overhead is budgeted at $24,000. The company actually produced 4,500 widgets in 10,000 direct labor hours. The total spending variance is $2,000 favorable; the standard time per widget is set at two direct labor hours. The total overhead rate is $10 per direct labor hour. The volume variance is equal to $3,000 favorable. Required: What was the level of actual spending? How much is the efficiency variance? What is the variable overhead rate? What was the budgeted normal capacity?
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.
Fixed
Required:
- What was the level of actual spending?
- How much is the efficiency variance?
- What is the variable overhead rate?
- What was the budgeted normal capacity?
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