The data below relate to the month of November for Badong, Inc. which uses a standard cost system: Actual direct labor cost, P43,400 Actual hours used, 14,000 Standard hours allowed for good output, 15,000 Direct labor rate variance – debit, 1,400 Actual total overhead, 32,000 Budgeted fixed cost, 9,000 Normal activity in hours, 12,000 Total application rate per standard direct labor hour, 2.25 Badong uses a two-way analysis of overhead variance. What was Badong’s budget (controllable) variance for November? 500 favorable 2,250 favorable 500 unfavorable 2,250 unfavorable
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.
The data below relate to the month of November for Badong, Inc. which uses a
Actual direct labor cost, P43,400
Actual hours used, 14,000
Standard hours allowed for good output, 15,000
Direct labor rate variance – debit, 1,400
Actual total
Budgeted fixed cost, 9,000
Normal activity in hours, 12,000
Total application rate per standard direct labor hour, 2.25
Badong uses a two-way
What was Badong’s
500 favorable
2,250 favorable
500 unfavorable
2,250 unfavorable
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