Adams Company’s standard labor cost of producing one unit of Product DD is 4.00 hours at the rate of $12.00 per hour. During August, 40,600 hours of labor are incurred at a cost of $12.15 per hour to produce 10,000 units of Product DD. a) What is the total labor variance? b) What is the labor price and quantity variances? c) What is the labor price and quantity variances, assuming the standard is 4.10 hours of direct labor at $12.25 per hour?
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.
Adams Company’s
a) What is the total labor variance?
b) What is the labor price and quantity variances?
c) What is the labor price and quantity variances, assuming the standard is 4.10 hours of direct labor at $12.25 per hour?
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