A manufacturing company uses a standard costing system for its product. The company uses a standard unit. Selected results for the most recent period are provided below: CAT Budgeted Production Actual Production Actual Direct Labor Cost Labor Rate Variance Labor Spending Variance 3,400 units 2,300 units $20,170 $3,620 Favorable $3,750 Favorable
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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