A retail product has the following standard costs established: Direct Material per unit - 2 pounds at $5 a pound Direct Labor per unit - 3 hours at $12 an hour Manufacturing Overhead - $5 per labor hour The following are the actual costs for the month in producing 1,000 units: Direct Material $11,500 (2,090 pounds used) Direct Labor $35,000 (2,800 hours used) Manufacturing Overhead applied $17,000
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.
Ch 24 -
A retail product has the following standard costs established:
- Direct Material per unit - 2 pounds at $5 a pound
- Direct Labor per unit - 3 hours at $12 an hour
- Manufacturing
Overhead - $5 per labor hour
The following are the actual costs for the month in producing 1,000 units:
- Direct Material $11,500 (2,090 pounds used)
- Direct Labor $35,000 (2,800 hours used)
- Manufacturing Overhead applied $17,000
Answer the following questions based on the data above:
- Compute the actual material cost per pound?
- Compute the actual labor rate per hour?
- Compute the Total Material variance
- Compute the Material Price variance
- Compute the Material Quantity variance
- Compute the Total Labor variance
- Compute the Labor Price variance
- Compute the Labor Quantity variance
- Compute the Total Manufacturing Overhead variance
- Which variance(s) would be the responsibility of the Production Manager?
- Which variance(s) would be the responsibility of the Purchasing Manager?
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