Gibson Manufacturing Company set its standard variable manufacturing cost at $28 per unit of product. The company planned to make and sell 3,500 units of product during Year 3. More specifically, the master budget called for total variable manufacturing cost to be $98,000. Actual production during Year 3 was 3,600 units, and actual variable manufacturing costs amounted to $101,690. The production supervisor was asked to explain the variance between budgeted and actual cost ($101,690 - $98,000 $3,690). The supervisor responded that she was not responsible for the variance that was caused solely by the increase in sales volume controlled by the marketing department. Required a. Determine the flexible budget variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). Note: Select "None" if there is no effect (i.e., zero variance). b. Do you agree with the production supervisor?

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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.