ABC Company makes a single product which has the following standards: Direct materials 2 kilograms $4.30 per kilogram Direct labor 3 hours $6.00 per hour Variable overhead 3 hours $6.50 per hour Fixed overhead 3 hours $9.00 per hour The following data pertain to June's operations: • Direct labor was $820,500 for 147,000 hours worked • Direct material purchases were 110,000 kilograms for $485,000 • Variable manufacturing overhead incurred was $986,000 • Fixed manufacturing overhead incurred was $1,154,500 • 93,000 kilograms of direct materials were used • The company sold 42,000 units at $130 each • Variable manufacturing overhead is applied based on direct labor hours • 46,000 units were produced during the year • Budgeted production was 45,000 units • At the beginning of June there were no inventories. The labor efficiency variance is: Do not round intermediate calculations. $61,500 U $61,500 F $54,000 F $54.000 U
ABC Company makes a single product which has the following standards: Direct materials 2 kilograms $4.30 per kilogram Direct labor 3 hours $6.00 per hour Variable overhead 3 hours $6.50 per hour Fixed overhead 3 hours $9.00 per hour The following data pertain to June's operations: • Direct labor was $820,500 for 147,000 hours worked • Direct material purchases were 110,000 kilograms for $485,000 • Variable manufacturing overhead incurred was $986,000 • Fixed manufacturing overhead incurred was $1,154,500 • 93,000 kilograms of direct materials were used • The company sold 42,000 units at $130 each • Variable manufacturing overhead is applied based on direct labor hours • 46,000 units were produced during the year • Budgeted production was 45,000 units • At the beginning of June there were no inventories. The labor efficiency variance is: Do not round intermediate calculations. $61,500 U $61,500 F $54,000 F $54.000 U
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
Topic Video
Question
ABC Company makes a single product which has the following standards:
Direct materials 2 kilograms $4.30 per kilogram
Direct labor 3 hours $6.00 per hour
Variable
Fixed overhead 3 hours $9.00 per hour
Transcribed Image Text:### ABC Company Production Data and Variance Analysis
#### Product Standards
- **Direct Materials:** 2 kilograms at $4.30 per kilogram
- **Direct Labor:** 3 hours at $6.00 per hour
- **Variable Overhead:** 3 hours at $6.50 per hour
- **Fixed Overhead:** 3 hours at $9.00 per hour
#### June Operations Data
- **Direct Labor Costs:** $820,500 for 147,000 hours worked
- **Direct Material Purchases:** 110,000 kilograms for $485,000
- **Variable Manufacturing Overhead Incurred:** $986,000
- **Fixed Manufacturing Overhead Incurred:** $1,154,500
- **Direct Materials Used:** 93,000 kilograms
- **Sales:** 42,000 units at $130 each
- **Production:** 46,000 units were produced during the year
- **Budgeted Production:** 45,000 units
- **Inventory at Start of June:** None
#### Variance Analysis
The labor efficiency variance is calculated to measure the efficiency of labor usage. Options for the labor efficiency variance calculation are given as follows:
- **$61,500 Unfavorable (U)**
- **$61,500 Favorable (F)**
- **$54,000 Favorable (F)**
- **$54,000 Unfavorable (U)**
Note: When conducting variance analysis, do not round intermediate calculations. The choice determines whether the actual labor used was more or less efficient compared to the standard set for production. A favorable variance indicates better efficiency, while an unfavorable variance indicates inefficiency.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education