1. Calculate the fixed overhead spending variance and indicate whether it is favorable (F) or unfavorable (U). 2. If Chart Hills uses direct labor-hours available at capacity to calculate the budgeted fixed overhead rate, what is the production-volume variance? Indicate whether it is favorable (F) or unfavorable (U). 3. An unfavorable production-volume variance could be interpreted as the economic cost of unused ca- pacity. Why would Chart Hills be willing to incur this cost? 4. Chart Hills' budgeted variable cost per unit is $18, and it expects to sell its shirts for $35 apiece. Com- pute the sales-volume variance and reconcile it with the production-volume variance calculated in requirement 2. What does each concept measure? Required
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-volume variance analysis and sales-volume variance. Chart Hills Company makes customized golf shirts for sale to golf courses. Each shirt requires 3 hours to produce because of the customized logo for each golf course. Chart Hills uses direct labor-hours to allocate the overhead cost to production. Fixed overhead costs, including rent,
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