Total overhead, 3-variance analysis. Pampered Pets, Inc., makes embellished accessories primarily for dogs. For 2017, budgeted variable overhead is $70,000 for 10,000 direct labor-hours. Budgeted total overhead is $100,000 at 8,000 direct labor-hours. The standard costs allocated to the production of these accessories included a total overhead rate of 80% of standard direct labor costs. In May 2017, Pampered Pets incurred total overhead of $133,000 and direct labor costs of $178,125. The direct labor efficiency variance was $7,500 unfavorable. The direct labor flexible-budget variance was $1,875 favorable. The standard labor price was $15 per hour. The production-volume variance was $16,000 favorable. Q1. Describe how individual variable overhead items are controlled from day to day. Also, describe how individual fixed overhead items are controlled.
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.
Total
Q1. Describe how individual variable overhead items are controlled from day to day. Also, describe how individual fixed overhead items are controlled.
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