Exam 10: Standard Costs, Flexible Budgets and Variance Analysis

How do managers decide which variances are important enough to investigate?

A favorable variance in one area might be offset by

Variance analysis is used for monitoring and performance evaluation.

Brodie Co. uses a standard job cost system and a denominator volume of 25,000 direct labor hours for allocating overhead. The actual output was 12,000 units, which cost $185,700 for direct labor (23,000 hours), $27,525 for variable overhead, and $136,400 for fixed overhead. The standard variable overhead per unit is $2 (2 hours @ $1 per hour), and the standard fixed overhead per unit is $10 (2 hours @ $5 per hour). All variances are immaterial and are closed to Cost of Goods Sold at the end of the period. The entry to close the fixed overhead variances includes a