Factory Overhead Cost Variance Report Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 15,000 hours for production: Variable overhead costs: Indirect factory labor Power and light Indirect materials Total variable overhead cost Fixed overhead costs: Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed overhead cost Indirect factory labor Power and light Indirect materials Total variable cost $42,000 11,400 21,000 $38,220 10,450 20,600 $69,270 $64,980 17,100 31,920 Total factory overhead cost Tannin has available 19,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 14,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Actual variable factory overhead costs: $74,400 114,000 $188,400

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 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 t…