Compute the price and quantity variances for direct materials and direct labor. Materials price variance Materials quantity variance Labor price variance Labor quantity variance $ $ +A $ $
Compute the price and quantity variances for direct materials and direct labor. Materials price variance Materials quantity variance Labor price variance Labor quantity variance $ $ +A $ $
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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Transcribed Image Text:Compute the price and quantity variances for direct materials and direct labor.
Materials price variance
Materials quantity variance
Labor price variance
Labor quantity variance
LA
LA
LA
Transcribed Image Text:Bonita Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the
company's customers are governmental agencies, prices are strictly regulated. Therefore, Bonita Labs must constantly monitor and
control its testing costs. Shown below are the standard costs for a typical test.
Direct materials (2 test tubes @ $1.40 per tube)
Direct labor (1 hour @ $24 per hour)
Variable overhead (1 hour @ $7.20 per hour)
Fixed overhead (1 hour @ $9.00 per hour)
Total standard cost per test
Direct materials (2,800 test tubes)
Direct labor (1,390 hours)
Variable overhead
Fixed overhead
$3,080
31,275
The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity
for the month of November 2022, when 1,330 tests were conducted, resulted in the following.
7,650
$2.80
24.00
12,500
7.20
9.00
$43.00
Monthly budgeted fixed overhead is $12,600. Revenues for the month were $67,500, and selling and administrative expenses were
$4,500.
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