GB Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity Actual level of activity. Cost formula for variable manufacturing overhead cost, Budgeted fixed manufacturing overhead cost Actual total variable manufacturing overhead Actual total fixed manufacturing overhead 8,500 MHs 8,600 MHs P5.70 per MH P50,000 "P51,600 P54,000 P570 favorable P4,000 favorable P4,000 unfavorable P570 unfavorable

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Q: Alpesh

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A:

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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.