Wilms, Inc. uses a standard cost system. Overhead cost information for product A for the month of November is as follows: Total actual overhead incurred, P12,600 Fixed overhead budgeted, P3,300 Total standard overhead rate per direct labor, P4.00 Variable overhead rate per direct labor hour, P3.00 Standard hours allocated for actual production, 3,500 What is the overall (or net) overhead variance? P1,200 unfavorable P1,400 favorable P1,200 favorable P1,400 unfavorable
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.
Wilms, Inc. uses a
Total actual overhead incurred, P12,600
Fixed overhead budgeted, P3,300
Total standard overhead rate per direct labor, P4.00
Variable overhead rate per direct labor hour, P3.00
Standard hours allocated for actual production, 3,500
What is the overall (or net) overhead variance?
P1,200 unfavorable
P1,400 favorable
P1,200 favorable
P1,400 unfavorable
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