he following information relates to a given department of Viernes Company for its fourth quarter of 2020: Actual total overhead (Fixed plus variable) P178,500 Budget formula P110,000 plus P50 per hour Total factory overhead application rate P1.50 per hour Spending variance – UF P8,000 Volume variance – F P5,000 The total variance is divided into 3 variances: Spending, Efficiency & Volume. What were the actual hours worked during the quarter? What were the standard hours allowed for good output during the quarter? Each unit takes 5 hours to manufacture, and the selling price is P 4.50 per unit. Based on the overhead budget formula, how many units must be sold to generate P 30,000 more than total budgeted overhead costs?
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.
- he following information relates to a given department of Viernes Company for its fourth quarter of 2020:
Actual total
Budget formula P110,000 plus P50 per hour
Total factory overhead application rate P1.50 per hour
Spending variance – UF P8,000
Volume variance – F P5,000
The total variance is divided into 3 variances: Spending, Efficiency & Volume.
- What were the actual hours worked during the quarter?
- What were the standard hours allowed for good output during the quarter?
- Each unit takes 5 hours to manufacture, and the selling price is P 4.50 per unit. Based on the overhead budget formula, how many units must be sold to generate P 30,000 more than total budgeted overhead costs?
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