ollowing information for one of a company’s variable expenses: The amount of the expense in the planning budget is $9,000. The cost formula is $9.00 per hour. The actual level of activity is 900 hours. The spending variance is $230 unfavorable. The actual amount of the expen
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.
Assume the following information for one of a company’s variable expenses:
- The amount of the expense in the planning budget is $9,000.
- The cost formula is $9.00 per hour.
- The actual level of activity is 900 hours.
- The spending variance is $230 unfavorable.
The actual amount of the expense must be:
Expense refers to the total amount of costs involved in manufacturing a product in order to create revenue for the company.
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