The following overhead data are for a department in Sun Company for month of May. Actual Results Static budget Activity level (in units) 1,000 1,200 Variable costs: Indirect materials $8,850 $10,000 Power-variable portion $930 $1,200 Fixed costs: Power-fixed portion $2,100 $2,800 Rent $5,220 $5,000 Supervisors salaries $12,800 $12,000 Company wants to assess how well costs were controlled in this department in May. Compute overall flexible budget cost variance for month of May.
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.
The following overhead data are for a department in Sun Company for month of May.
|
|
Actual Results |
Static budget |
|
Activity level (in units) |
1,000 |
1,200 |
|
Variable costs: |
|
|
|
Indirect materials |
$8,850 |
$10,000 |
|
Power-variable portion |
$930 |
$1,200 |
|
Fixed costs: |
|
|
|
Power-fixed portion |
$2,100 |
$2,800 |
|
Rent |
$5,220 |
$5,000 |
|
Supervisors salaries |
$12,800 |
$12,000 |
Company wants to assess how well costs were controlled in this department in May. Compute overall flexible
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