The management of Pamela's Pet Supplies has calculated the following variances: Direct materials cost variance $10,000 U Direct materials efficiency variance 40,000 F Direct labor cost variance 15,000 F Direct labor efficiency variance 13,500 U Total variable overhead variance 8,000 F Fixed overhead cost variance 4,500 F When determining the total product cost flexible budget variance, what is the fixed overhead variance of the company? A. $13,500 U B. $10,000 U C. $4,500 F D. $12,500 F
The management of Pamela's Pet Supplies has calculated the following variances: Direct materials cost variance $10,000 U Direct materials efficiency variance 40,000 F Direct labor cost variance 15,000 F Direct labor efficiency variance 13,500 U Total variable overhead variance 8,000 F Fixed overhead cost variance 4,500 F When determining the total product cost flexible budget variance, what is the fixed overhead variance of the company? A. $13,500 U B. $10,000 U C. $4,500 F D. $12,500 F
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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The management of Pamela's Pet Supplies has calculated the following variances:
|
Direct materials cost variance
|
$10,000 U
|
|
Direct materials efficiency variance
|
40,000 F
|
|
Direct labor cost variance
|
15,000 F
|
|
Direct labor efficiency variance
|
13,500 U
|
|
Total variable
|
8,000 F
|
|
Fixed overhead cost variance
|
4,500 F
|
When determining the total product cost flexible budget variance, what is the fixed overhead variance of the company?
$13,500
U$10,000
U$4,500
F$12,500
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