The following information relates to a given department of Mervi Company for the first quarter of 2018: Actual total overhead (fixed plus variable) P 178,500 Budget formula: Total FOH Cost = P 110,000 + 0.50/hr Total overhead application rate P 1.50 per hour Spending variance (from three way) 8,000 UF Volume variance (from two way) 5,000 F Each unit takes five hours to manufacture and selling price is P 4.50 per unit. Based on the overhead budget formula, how many units must be sold to generate P 30,000 more than total budgeted overhead costs?
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 relates to a given department of Mervi Company for the first quarter of 2018:
Actual total overhead (fixed plus variable) P 178,500
Budget formula:
Total FOH Cost = P 110,000 + 0.50/hr
Total overhead application rate P 1.50 per hour
Spending variance (from three way) 8,000 UF
Volume variance (from two way) 5,000 F
Each unit takes five hours to manufacture and selling price is P 4.50 per unit. Based on the overhead budget formula, how many units must be sold to generate P 30,000 more than total budgeted overhead costs?
a. 27,500
b. 35,000
c. 55,000
d. 70,000
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