In October, Pine Company reports 20,600 actual direct labor hours, and it incurs $257,000 of manufacturing overhead costs. Standard hours allowed for the work done is 25,700 hours. The predetermined overhead rate is $10.25 per direct labor hour. In addition, the flexible manufacturing overhead budget shows that budgeted costs are $8.19 variable per direct labor hour and $51,500 fixed. Compute the overhead volume variance. Normal capacity was 25,000 direct labor hours.
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.
In October, Pine Company reports 20,600 actual direct labor hours, and it incurs $257,000 of
Compute the overhead volume variance. Normal capacity was 25,000 direct labor hours.
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