Using the following information, prepare a factory overhead cost budget for Starts Inc. where the total factory overhead cost is $115,000 at normal capacity (100%). Include capacity at 40%, 75%, 100%, and 115%. Total variable cost is $18.50 per unit and total fixed costs are $78,000. The information is for the month ending October 31. (Hint: Determine units produced at normal capacity.) If the company operates at 75%, (2) compute the Factory Overhead Variance (Controllable) and indicate whether it is favorable or 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.
Using the following information, prepare a
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