The technology budget for Carlyle for the first quarter of 2017 was as follows: Client interactions 12,000 Fixed Overhead $14,400 Variable Overhead 4,800 CPU units @ $2 per CPU unit The actual results for the first quarter of 2017 are given below: Client interactions 13,600 $14,100 Fixed Overhead Variable Overhead $11,200 CPU Units used 5,500 1. Calculate the variable overhead spending and efficiency variances, and indicate whether each is fa- vorable (F) or unfavorable (U). 2. Calculate the fixed overhead spending and production-volume variances, and indicate whether each is favorable (F) or unfavorable (U). 3. Comment on Carlyle Capital's overhead variances. In your view, is the firm right to be worried about its control over technology spending? Required
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.
After some study, Carlyle determines that its variable and fixed technology overhead costs are both driven by the processing time involved in meeting client requests. This is typically measured in CPU units of their computer usage. Carlyle’s measure of output is the number of client interactions in a given period.
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