A company manufactures three related, but different, products. These are dishwashers, washing machines and refrigerators. Each product has a standard time per unit of production. These are: Dishwashers 10hours Washing machines 12hours Refrigerators 14hours In the month of March the actual production was: Dishwashers 150 Washing machines 100 Refrigerators 90 And the labour details were: Actual hours worked 4,100 Actual direct labour hours paid for 4,300 Standard hourly rate K4 Actual wages incurred K18, 450 You are required to: Calculate the standard hours produced in the month of March Calculate the following variances; Total direct labour variance Direct labour rate variance Direct labour efficiency variance. Direct labour idle time variance Interpret the meaning of the direct labour variances calculated in (b) above What is interdependence of variances
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.
A company manufactures three related, but different, products. These are dishwashers, washing machines and refrigerators. Each product has a standard time per unit of production. These are:
Dishwashers 10hours
Washing machines 12hours
Refrigerators 14hours
In the month of March the actual production was:
Dishwashers 150
Washing machines 100
Refrigerators 90
And the labour details were:
Actual hours worked 4,100
Actual direct labour hours paid for 4,300
Standard hourly rate K4
Actual wages incurred K18, 450
You are required to:
Calculate the standard hours produced in the month of March
Calculate the following variances;
Total direct labour variance
Direct labour rate variance
Direct labour efficiency variance.
Direct labour idle time variance
Interpret the meaning of the direct labour variances calculated in (b) above
What is interdependence of variances
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