13. Direct Materials and Direct Labor Variance Analysis Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 50 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows: Standard wage per hr. $11.40 Standard labor time per faucet 15 min. Standard number of lb. of brass 1.70 lb. Standard price per lb. of brass $11.00 Actual price per lb. of brass $11.25 Actual lb. of brass used during the week 12,100 lb. Number of faucets produced during the week 6,900 Actual wage per hr. $11.70
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.
13. Direct Materials and Direct Labor Variance Analysis
Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 50 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows:
| Standard wage per hr. | $11.40 |
| Standard labor time per faucet | 15 min. |
| Standard number of lb. of brass | 1.70 lb. |
| Standard price per lb. of brass | $11.00 |
| Actual price per lb. of brass | $11.25 |
| Actual lb. of brass used during the week | 12,100 lb. |
| Number of faucets produced during the week | 6,900 |
| Actual wage per hr. | $11.70 |
| Actual hrs. per week | 2,000 hrs. |
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