Planned Actual Production 92,000 units 87,000 units Direct labor hours 506,800 DL hrs 380,000 DL hrs Fixed manufacturing overhead $205,000 $182,400 Variable manufacturing overhead $910,000 $841,500 Standard direct labor hour per unit 5.5 How to do overhead variances: 1. overhead volume variance 2. overhead efficiency variance 3. overhead spending 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.
Planned Actual
Production 92,000 units 87,000 units
Direct labor hours 506,800 DL hrs 380,000 DL hrs
Fixed manufacturing
Variable manufacturing overhead $910,000 $841,500
Standard direct labor hour per unit 5.5
How to do overhead variances:
1. overhead volume variance
2. overhead efficiency variance
3. overhead spending variance
Step by step
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