ABC Company manufactures tires. Standard and actual costs for the manufacture of 5,500 tires were as follows: Direct Materials Standard Actual Direct Labor Standard Actual Factory Overhead Actual: Variable 82,000 lbs. $5.10 82,600 lbs. @ $5.00 Standard: FOH rates per DL hour based on 100% normal capacity of 1,500 DL hours Variable $ 3.10 Fixed $ 4.90 Each tire requires 0.3 hr. of DL 1,650 hrs. @ $17.50 1,680 hrs. @ $17.40 $5,000 Required: 1. Calculate the following variances: A. DM (price, quantity, total) B. DL (rate, time, total)

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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.