The following information refers to the Finishing Department of Tom Company for the fourth quarter: Total actual Overhead 178,500 Budgeted Allowance Formula 110,000 plus 0.50 per direct labor hour Predetermined factory overhead rate 1.50 per direct labor hour Spending variance 8,000 unfavorable Efficiency variance 9,000 unfavorable The total factory overhead is divided into three variances – spending, idle capacity and efficiency. Compute for the actual direct labor hours worked in the finishing department during the fourth quarter. Indicate if favorable or 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 following information refers to the Finishing Department of Tom Company for the fourth quarter:
Total actual
Budgeted Allowance Formula 110,000 plus 0.50 per direct labor hour
Predetermined factory overhead rate 1.50 per direct labor hour
Spending variance 8,000 unfavorable
Efficiency variance 9,000 unfavorable
The total factory overhead is divided into three variances – spending, idle capacity and efficiency. Compute for the actual direct labor hours worked in the finishing department during the fourth quarter. Indicate if favorable or unfavorable.
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