The normal capacity of the Cutting Department is 12,000 machine hours per month. At normal capacity, the standard factory overhead rate is P12.50 per machine hour based on P96,000 budgeted fixed cost per month and a variable cost rate of P4.50 per machine hour. During May, the department operated at 12,500 machine hours, with actual factory overhead of P166,000. The number of standard machine hours allowed for the production actually attained is 11,000. The controllable variance and volume variance, respectively, are
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 normal capacity of the Cutting Department is 12,000 machine hours per month. At normal capacity, the standard factory
The controllable variance and volume variance, respectively, are
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