Fixed manufacturing overhead, variance analysis (continuation of 8-21). Esquire Clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2017 are budgeted, $62,400, and actual, $63,916. Required: Compute the spending variance for fixed manufacturing overhead. Comment on the results. Compute the production-volume variance for June 2017. What inferences can Esquire Clothing draw from this variance?
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.
Fixed manufacturing overhead,
Required:
- Compute the spending variance for fixed manufacturing overhead. Comment on the results.
- Compute the production-volume variance for June 2017. What inferences can Esquire Clothing draw from this variance?
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