Percent of capacity 90% 100% 110% Direct labor hours 3,600 4,000 4,400 Units of output 900 1,000 1,100 Variable overhead $3,600 $4,000 $4,400 Fixed overhead 5,600 5,600 5,600 Total overhead $9,200 $9,600 $10,000
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.
| Percent of capacity | 90% | 100% | 110% |
| Direct labor hours | 3,600 | 4,000 | 4,400 |
| Units of output | 900 | 1,000 | 1,100 |
| Variable |
$3,600 | $4,000 | $4,400 |
| Fixed overhead | 5,600 | 5,600 | 5,600 |
| Total overhead | $9,200 | $9,600 | $10,000 |
Normal capacity = 100% and overhead is applied based on direct labor hours
Standard overhead rate = $9,600/4,000 = $2.40 per direct labor hour
Direct materials are $68.00 per unit.
Direct labor is $25.00 per hour.
Prepare a flexible budget for overhead based on the above data.
Flexible Budget
| 900 | 1,000 | 1,100 | |
| Direct Material | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 |
| Direct Labor | fill in the blank 4 | fill in the blank 5 | fill in the blank 6 |
| Variable Overhead | fill in the blank 7 | fill in the blank 8 | fill in the blank 9 |
| Fixed Overhead | fill in the blank 10 | fill in the blank 11 | fill in the blank 12 |
| Total | $fill in the blank 13 | $fill in the blank 14 | $fill in the blank 15 |
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