Production costs (including $40,000 of fixed cost) are budgeted at $150,000 for an expected output of 100,000 units. Actual output was 90,000 units, while actual costs were $142,500. What was the flexible budget variance, and is it favorable or unfavorable?
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.
Production costs (including $40,000 of fixed cost) are budgeted at $150,000 for an expected output of 100,000 units. Actual output was 90,000 units, while actual costs were $142,500. What was the flexible
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