Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Hours 12 minutes (0.20 hours) During July, 3,850 hours of direct labour time were recorded to make 18.000 units. The direct labour cost totalled $74,305 for the month. Drect labour cost Required: 1-6. What direct labour cost should have been incurred to make the 18,000 speakers? (Do not round intermediate calculations.) Standard Rate per Hour $19.00 Total variance $ 5 Standard Cost $3.80 68,400 1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 5,905 U D
Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Hours 12 minutes (0.20 hours) During July, 3,850 hours of direct labour time were recorded to make 18.000 units. The direct labour cost totalled $74,305 for the month. Drect labour cost Required: 1-6. What direct labour cost should have been incurred to make the 18,000 speakers? (Do not round intermediate calculations.) Standard Rate per Hour $19.00 Total variance $ 5 Standard Cost $3.80 68,400 1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 5,905 U D
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Question
A.12.
Transcribed Image Text:2. Break down the difference in cost from requirement 1-b above into a labour rate variance and a labour efficiency variance. (Indicate
the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Labour rate variance
Labour efficiency variance
U
U
3. The budgeted variable manufacturing overhead rate is $3.00 per direct labour-hour. During July, the company incurred $11,935 in
variable manufacturing overhead cost. Compute the variable overhead spending and efficiency variances for the month. (Indicate the
effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Variable overhead spending variance
Variable overhead efficiency variance
Transcribed Image Text:Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses
standards to control its costs. The labour standards that have been set for one speaker are as follows:
Standard Hours
12 minutes (0.20 hours)
During July, 3,850 hours of direct labour time were recorded to make 18,000 units. The direct labour cost totalled $74,305 for the
month.
Direct labour cost
Standard Rate
per Hour
$19.00
Required.
1-6. What direct labour cost should have been incurred to make the 18.000 speakers? (Do not round intermediate calculations.)
Total variance
5
Standard
Cost
$3.80
$ 68,400
1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for
favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
5,905
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