The following information relates to a given department of Mervi Company for the first quarter of the year: Actual total overhead (fixed plus variable) P178,500 Budget formula: Total FOH Cost = P110,000 + P0.50/hr Total overhead application rate P1.50 per hour Spending variance (from three-way analysis) P8,000 unfavorable Volume variance (from two-way analysis) P5,000 favorable Each unit takes 5 hours to manufacture and the selling price is P4.50 per unit. Based on the overhead budget formula, how many units must be sold to generate P30,000 more than total budgeted overhead costs? Group of answer choices 55,000 27,500 35,000 70,000
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.
The following information relates to a given department of Mervi Company for the first quarter of the year:
Actual total overhead (fixed plus variable) P178,500
Budget formula: Total FOH Cost = P110,000 + P0.50/hr
Total overhead application rate P1.50 per hour
Spending variance (from three-way analysis) P8,000 unfavorable
Volume variance (from two-way analysis) P5,000 favorable
Each unit takes 5 hours to manufacture and the selling price is P4.50 per unit. Based on the overhead budget formula, how many units must be sold to generate P30,000 more than total budgeted overhead costs?
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