ABC Inc. uses a standard cost system for its production process. ABC applies overhead (fixed and variable) based on direct labor hours. The total budgeted overhead costs for august is P65,945.00 and the budgeted number of units to be produced is 5,450 units. The following information is available for August when Redd made 4,400 units: Standard Data Direct Materials 2 gallons at P5.00 per gallon Direct Labor 1.80 hour at P80.00 per hour Fixed Overhead 2.20 hour at P3.00 per hour During November, the company incurred the following costs: · Total Direct Materials purchased cost is P41,310 for 8,100 gallons. · Actual Variable overhead is P 29,950.00 Additional information: · Direct Materials used is 7,600 gallons · An actual direct labor hour for August is 8,800 · Unfavorable Labor Rate Variance of P 2,200.00 · Unfavorable Fixed Overhead Spending Variance of P 6,330.00 True or False: Statement 1: The Usage Price Variance is 750 U Statement 2: The Quantity Variance is 6,500 F A.False, False B.True, False C.True, True D.False, True
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 Inc. uses a
Standard Data
Direct Materials 2 gallons at P5.00 per gallon
Direct Labor 1.80 hour at P80.00 per hour
Fixed Overhead 2.20 hour at P3.00 per hour
During November, the company incurred the following costs:
· Total Direct Materials purchased cost is P41,310 for 8,100 gallons.
· Actual Variable overhead is P 29,950.00
Additional information:
· Direct Materials used is 7,600 gallons
· An actual direct labor hour for August is 8,800
· Unfavorable Labor Rate Variance of P 2,200.00
· Unfavorable Fixed Overhead Spending Variance of P 6,330.00
True or False:Statement 1: The Usage Price Variance is 750 U
Statement 2: The Quantity Variance is 6,500 F
A.False, False
B.True, False
C.True, True
D.False, True
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
