actual price paid for material $1.00 standard price for material $1.20 actual quality purchased and used in production 100 standard quality for units produced 110 actual labor rate per hour $15.00 standard labor rate per hour $16.00 actual hours 200 standard hours for unit produced 220 Required: Compute the material price and quantity, and the labor rate and efficiency variances. Describe the possible causes for this combination of favorable and unfavorable variances.
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.
| actual price paid for material | $1.00 |
| standard price for material | $1.20 |
| actual quality purchased and used in production | 100 |
| standard quality for units produced | 110 |
| actual labor rate per hour | $15.00 |
| standard labor rate per hour | $16.00 |
| actual hours | 200 |
| standard hours for unit produced | 220 |
Required:
Compute the material price and quantity, and the labor rate and efficiency variances.
Describe the possible causes for this combination of favorable and unfavorable variances.
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