Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,000 Standard direct labor hours per unit 0.20 Standard variable overhead rate (per direct labor hour) $3.40 Actual variable overhead costs $88,670 Actual hours worked 26,350 Requirement: 1. Calculate the total variable overhead variance. 2. What if actual production had been 129,600 units? How would that affect the total variable overhead variance? Indicate what the new variance would be below.
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.
Standish Company manufactures consumer products and provided the following information for the month of February:
| Units produced | 131,000 |
| Standard direct labor hours per unit | 0.20 |
| Standard variable |
$3.40 |
| Actual variable overhead costs | $88,670 |
| Actual hours worked | 26,350 |
Requirement:
1. Calculate the total variable overhead variance.
2. What if actual production had been 129,600 units? How would that affect the total variable overhead variance? Indicate what the new variance would be below.
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