f 100% of capacity had been selected instead as the denominator level, how would the reported unfavorable spending and volume variances be affected respectively?
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.
Last year, a department's
variable
denominator activity level selected for allocating overhead to the product was
based on 80% of capacity. If 100% of capacity had been selected instead as the
denominator level, how would the reported unfavorable spending and volume
variances be affected respectively?
A. increase, inchanged
B. increased , increased
C. unchanged, increased
D. unchanged, unchanged
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