he (partial) cost sheet for the single product manufactured at Vienna Company follows. Direct labor (23 hours @ $25) $ 575 Variable overhead (23 hours @ $2) 46 Fixed overhead (23 hours @ $4) 92 The master budget level of production is 94,000 direct-labor hours, which is also the production volume used to compute the fixed overhead application rate. Other information available for operations over the past accounting perio
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.
The (partial) cost sheet for the single product manufactured at Vienna Company follows.
Direct labor | (23 hours @ $25) | $ | 575 | |
Variable |
(23 hours @ $2) | 46 | ||
Fixed overhead | (23 hours @ $4) | 92 | ||
The
Actual variable overhead incurred | $ | 144,000 | |
Actual fixed overhead incurred | 392,400 | ||
Direct labor efficiency variance | 174,000 | U | |
Variable overhead price variance | 42,000 | F | |
Required:
a. What was the variable overhead efficiency variance?
b. What was the fixed overhead price variance?
c. What was the fixed overhead production volume variance?
(For all requirements, indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
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