1. Compute the January 2017 price and efficiency variances of direct materials and direct manufacturing labor.
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.
rice and efficiency variances (15 points). The Schuyler Corporation manufactures lamps. It has set up
the following standards per finished unit for direct materials and direct manufacturing labor:
Direct materials: 10 lb. at $4.50 per lb. $45.00
Direct manufacturing labor: 0.5 hour at $30 per hour 15.00
The number of finished units budgeted for January 2017 was 10,000; 9,850 units were actually produced.
Actual results in January 2017 were as follows:
Direct materials: 98,055 lb. used
Direct manufacturing labor: 4,900 hours $154,350
Assume that there was no beginning inventory of either direct materials or finished units.
During the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. Input price
variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage.
Required:
1. Compute the January 2017 price and efficiency variances of direct materials and direct manufacturing labor.
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