2. Note: Each answer must state whether the variance is favourable or unfavourable. 1. Labour rate variance 2. Labour efficiency variance 3. Variable overheads efficiency variance 4. Variable overheads expenditure variance
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.
Use the information provided below to calculate the following manufacturing variances for March
2022. Note: Each answer must state whether the variance is favourable or unfavourable.
1. Labour rate variance
2. Labour efficiency variance
3. Variable
4. Variable overheads expenditure variance
INFORMATION
Nevada Limited set a standard labour rate of R32 per hour and a standard variable overhead rate of R3.80 per
labour hour.
Actual hours worked for March 2022 were 4 910 at a cost of R149 264. The actual variable overhead cost incurred
was R19 640. The standard allowance of labour hours for the output achieved was 5 000 hours.
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