The following budget data pertain to the Machining Department of Grind Company: Maximum capacity 65,000 units Machine hours per unit 2.50 Variable factory
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 following budget data pertain to the Machining Department of Grind Company:
| Maximum capacity | 65,000 | units |
|---|---|---|
| Machine hours per unit | 2.50 | |
| Variable factory |
$ 4.40 | per machine hour |
| Fixed factory overhead | $ 432,500 |
The company prepared the budget at 75% of the maximum capacity level. The department uses machine hours as the basis for applying standard
The standard fixed overhead application rate for the Machining Department (to two decimal places) is:
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$3.55 per machine hour.
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$3.62 per machine hour.
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$4.23 per machine hour.
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$3.04 per machine hour.
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$8.65 per machine hour.
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