Variance Variable Factory Overhead Controllable Variance Fixed Factory Overhead Volume Variance Total Factory Overhead Cost Variance Amount Favorable/Unfavorable
Variance Variable Factory Overhead Controllable Variance Fixed Factory Overhead Volume Variance Total Factory Overhead Cost Variance Amount Favorable/Unfavorable
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:Factory Overhead Variance Corrections
The data related to shunda Enterprises Inc.'s factory overhead cost for the production of 60,000 units of product are as follows:
Variable factory overhead
$369,400
263,700
Fixed factory overhead
Standard: 91,000 hrs. at $7.00 ($4.10 for variable factory overhead)
637,000
Actual:
Productive capacity at 100% of normal was 90,000 hours, and the factory overhead cost budgeted at the level of 91,000 standard hours was $633,200. Based on these data, the chief cost accountant prepared the
following variance analysis:
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred
Budgeted variable factory overhead for 91,000 hours
Variance-favorable
Fixed factory overhead volume variance:
Normal productive capacity at 100%
Standard for amount produced
Productive capacity not used
Standard variable factory overhead rate
Variance-unfavorable
Total factory overhead cost variance-unfavorable
$369,400
373,100
90,000 hrs.
91,000
1,000 hrs.
x $7.00
$(3,700)
7,000
$3,300
Transcribed Image Text:Variance
Variable Factory Overhead Controllable Variance
Fixed Factory Overhead Volume Variance
Total Factory Overhead Cost Variance
Amount
Favorable/Unfavorable
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