Acme Inc. has the following information available: Actual Price paid for material $1.00 Standard Price for material $0.90 Actual quantity purchased and used in production 100 Standard quantity for units produced 90 Actual labor rate per hour $15.00 Standard labor rate per hour $14.00 Actual hours 200 hours Standard hours for units produced 190 hours Variance Variance Amount Favorable (F) or Unfavorable (U) Material Price Material Quantity Total DM Cost Variance Labor Rate Labor Efficiency Total DL Cost Variance
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.
Acme Inc. has the following information available:
Actual Price paid for material $1.00
Standard Price for material $0.90
Actual quantity purchased and used in production 100
Standard quantity for units produced 90
Actual labor rate per hour $15.00
Standard labor rate per hour $14.00
Actual hours 200 hours
Standard hours for units produced 190 hours
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Variance |
Variance Amount |
Favorable (F) or Unfavorable (U) |
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Material Price |
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Material Quantity |
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Total DM Cost Variance |
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Labor Rate |
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|
Labor Efficiency |
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Total DL Cost Variance |
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