2.2 Use the information provided below to calculate the following variances for May 2021. Each answer must indicate whether the variance is favourable or unfavourable. 2.2.1 Material quantity variance 2.2.2 Labour efficiency variance 2.2.3 Total labour variance (without using the labour rate or efficiency variances) INFORMATION The expected production and standard costs for each unit of Product A manufactured by Luton Manufacturers are as follows: Expected production 30 000 units Direct material 15 kg at R8.60 per kg Direct labour 3 hours at R8 per hour Actual figures of Luton Manufacturers for Product A for May 2021 are as follows: Production 27 500 units 432 000kg at R8.40 per kg Direct material used Direct labour incurred 80 000 hours at R8.40 per hour
2.2 Use the information provided below to calculate the following variances for May 2021. Each answer must indicate whether the variance is favourable or unfavourable. 2.2.1 Material quantity variance 2.2.2 Labour efficiency variance 2.2.3 Total labour variance (without using the labour rate or efficiency variances) INFORMATION The expected production and standard costs for each unit of Product A manufactured by Luton Manufacturers are as follows: Expected production 30 000 units Direct material 15 kg at R8.60 per kg Direct labour 3 hours at R8 per hour Actual figures of Luton Manufacturers for Product A for May 2021 are as follows: Production 27 500 units 432 000kg at R8.40 per kg Direct material used Direct labour incurred 80 000 hours at R8.40 per hour
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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