Formidable Company collected the following information: Standard costs per unit: Variable overhead 4 machine hours @ $6 per machine hour Fixed overhead 4 machine hours @ $10 per machine hour Actual output 20,000 units Denominator (normal capacity) output 21,000 units Actual machine hours 79,000 machine hours Actual variable overhead cost $540,000 Actual fixed overhead cost $810,000 Using the two variance method, what is the total variance? a.$70,000 (F) b.$30,000 (U) c.$70,000 (U) d.$30,000 (F)
Formidable Company collected the following information: Standard costs per unit: Variable overhead 4 machine hours @ $6 per machine hour Fixed overhead 4 machine hours @ $10 per machine hour Actual output 20,000 units Denominator (normal capacity) output 21,000 units Actual machine hours 79,000 machine hours Actual variable overhead cost $540,000 Actual fixed overhead cost $810,000 Using the two variance method, what is the total variance? a.$70,000 (F) b.$30,000 (U) c.$70,000 (U) d.$30,000 (F)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Formidable Company collected the following information:
Using the two variance method, what is the total variance?
| Variable |
4 machine hours @ $6 per machine hour |
| Fixed overhead | 4 machine hours @ $10 per machine hour |
| Actual output | 20,000 units |
| Denominator (normal capacity) output | 21,000 units |
| Actual machine hours | 79,000 machine hours |
| Actual variable overhead cost | $540,000 |
| Actual fixed overhead cost | $810,000 |
Using the two variance method, what is the total variance?
a.$70,000 (F)
b.$30,000 (U)
c.$70,000 (U)
d.$30,000 (F)
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