The Pangasinan Company has a standard costing system. The following data are available for January: I. Actual variable manufacturing overhead: P25, 500 II. Actual direct labor hours worked: 5, 800 III. Variable overhead spending variance : P600 favorable IV. Variable overhead efficiency variance: P2, 475 unfavorable V. Variable overhead is assigned to production on the basis of direct labor hours. Note: F denotes favorable and U denotes unfavorable The standard hours allowed for January production is
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 Pangasinan Company has a standard costing system. The following data are available for January: I. Actual variable manufacturing
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