Ex. 6-3. Factory Overhead Variance - Fixed Budget Approach. For the month of March, Department 1 of Chiqui Company incurred total overhead costs of P525,000 in producing 2,500 units of product, for which 24,000 hours were used. For such month, the department's budgeted factory overhead cost was P600,000 based on the normal activity level of 30,000 hours or 3,000 units of product. Required: Compute and analyze the factory overhead variance using the three- variance method of analysis.
Ex. 6-3. Factory Overhead Variance - Fixed Budget Approach. For the month of March, Department 1 of Chiqui Company incurred total overhead costs of P525,000 in producing 2,500 units of product, for which 24,000 hours were used. For such month, the department's budgeted factory overhead cost was P600,000 based on the normal activity level of 30,000 hours or 3,000 units of product. Required: Compute and analyze the factory overhead variance using the three- variance method of analysis.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 16E: Thomas Textiles Corporation began November with a budget for 60,000 hours of production in the...
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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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