ABC Company uses standard costing for each specialized product. The following information is available: Standards: Material 3.0 feet per unit @ 42.00 per foot Labor 2.5 hours per unit @ 75.00 per hour Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ 45.00 per foot Labor 7,000 direct labor hours @ 79.00 per hour How much is the labor efficiency variance? A. 9,875 F B. 9,375 F C. 9,875 U D. 9,375 U
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.
ABC Company uses
Standards:
Material 3.0 feet per unit @ 42.00 per foot
Labor 2.5 hours per unit @ 75.00 per hour
Actual:
Production 2,750 units produced during the month
Material 8,700 feet used; 9,000 feet purchased @ 45.00 per foot
Labor 7,000 direct labor hours @ 79.00 per hour
How much is the labor efficiency variance?
A. 9,875 F
B. 9,375 F
C. 9,875 U
D. 9,375 U
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