A manufacturing company has a standard costing system based on standard machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,400 MHS Overhead costs at the denominator activity level: Variable overhead cost $33,920 Fixed overhead cost $122,240 The following data pertain to operations for the most recent period: Actual hours 6,800 MHs Standard hours allowed for the actual output 6,493 MHs Actual total variable overhead cost $37,340 Actual total fixed overhead cost $123,990 What was the variable overhead efficiency variance for the period to the nearest dollar?
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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