The standard costs and actual costs for factory overhead for the manufacture of 2,700 units of actual production are as follows: Standard Costs Fixed overhead (based on 10,000 hours) 3 hours per unit @ $0.72 per hour Variable overhead 3 hours per unit @ $1.99 per hour Actual Costs Total variable cost, $18,200 Total fixed cost, $7,800 The amount of the fixed factory overhead volume variance 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
| Standard Costs | |
| Fixed overhead (based on 10,000 hours) | 3 hours per unit @ $0.72 per hour |
| Variable overhead | 3 hours per unit @ $1.99 per hour |
Actual Costs |
|
| Total variable cost, $18,200 | |
| Total fixed cost, $7,800 |
The amount of the fixed factory overhead volume variance is
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