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VARIANCE ANALYSIS FOR OVERHEAD Textra Control Company, which manufactures electrical switches, uses a standard-costing...

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Accounting

VARIANCE ANALYSIS FOR OVERHEAD

Textra Control Company, which manufactures electrical switches, uses a standard-costing system.

The standard production overhead costs per switch are based on direct-labor hours and are as follows:

Variable overhead (5 direct-labor hours @ P12.00 per hour)P60

Fixed overhead (5 direct-labor hours @ P18.00 per hour)*90

Total overhead P150

*Based on normal capacity of 300,000 direct labor-hours per month.

The following information is available for the month of February:

Variable overhead costs were P3,510,000

Fixed overhead costs were P5,625,000

56,000 switches were produced, although 60,000 switches were scheduled to be produced.

275,000 direct labor hours were worked at a total cost of P3,825,000

Compute and analyze the factory overhead variances by:

a.Two-way analysis (Controllable, Volume)

b.Three-way analysis (Spending, Efficiency, Volume)

c.Four-way analysis (Variable Spending, Fixed Spending, Efficiency, Volume)

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