The standard costs and actual costs for factory overhead for the manufacture of 2,700units of actual production are as follows: Standard Costs Line Item Description Value Fixed overhead (based on 10,000 hours) 3 hours per unit at $0.73 per hour Variable overhead 3 hours per unit at $1.92 per hour Actual Costs Total variable cost, $18,000 Total fixed cost, $8,000
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
| Line Item Description | Value |
|---|---|
| Fixed overhead (based on 10,000 hours) | 3 hours per unit at $0.73 per hour |
| Variable overhead | 3 hours per unit at $1.92 per hour |
Actual Costs
Total variable cost, $18,000
Total fixed cost, $8,000
The total factory overhead cost variance is
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