Selected operating information on three different companies for a recent year is given below: Company B Full-capacity machine-hours Budgeted machine-hours" Actual machine-hours" Standard machine-hours allowed for actual 31,000 30,000 30,000 30,500 Company A Company B Company C 20,000 19,000 700 production 18,600 21,000 "Denominator activity for computing the predetermined overhead rate. F U None 21,000 21,000 20,000 Required: For each company, state whether the volume variance would be favorable or unfavorable. (Indicate the effect of each varias selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.))
Selected operating information on three different companies for a recent year is given below: Company B Full-capacity machine-hours Budgeted machine-hours" Actual machine-hours" Standard machine-hours allowed for actual 31,000 30,000 30,000 30,500 Company A Company B Company C 20,000 19,000 700 production 18,600 21,000 "Denominator activity for computing the predetermined overhead rate. F U None 21,000 21,000 20,000 Required: For each company, state whether the volume variance would be favorable or unfavorable. (Indicate the effect of each varias selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.))
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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