$ 33,120 Factory depreciation Indirect labor 82,800 8,280 Factory electricity Indirect materials 31,800 Selling expenses Administrative expenses Total costs 22,000 29,000 $207,000 Budgeted Volume (Cases) Processing Hours per Case Tortilla chips Potato chips Pretzels 3,000 0.25 6,000 3,500 12,500 0.10 0.30 Total
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.
Scrumptious Snaks Inc. manufactures three types of snak foods:
tortilla chips, potato chips, and pretzels. The company has budgeted the
following costs for the upcoming periods:
Factory overhead is allocated to the three products on the basis of
processing hours. The Products had the following production budget
and processing hours per case:
a. Determine the single plantwide factory overhead rate.
b. Use the overhead rate in (a) to determine the amount of total and
per-case overhead allocated to each of the three products under
generally accepted accounting principles.
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