following information applies to the questions displayed below.] The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing overhead. The firm traces all direct costs to products, and it assigns overhead based on direct labor hours. The company budgeted $9,600 variable overhead and 2,000 direct labor hours to manufacture 4,000 pairs of boots in March. The factory used 3,700 direct labor hours in March to manufacture 3,800 pairs of boots and spent $16,800 on variable overhead during the month. For March the Platter Valley factory of Bybee Industries budgeted $92,000 of fixed overhead. Its practical capacity is 2,000 direct labor hours per month (to manufacture 4,000 pairs of boots). The actual fixed overhead incurred for the month was $95,000. The Platter Valley factory of Bybee Industries uses a three-variance analysis of the total factory overhead variance. Required: 1. Compute the total overhead spending variance, the efficiency variance, and the fixed overhead production volume variance. Spending Variance Efficiency Variance Production Volume Variance
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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