Crenshaw Manufacturing, Inc. planned to produce 25,000 units of its only product during the year. The standard cost data for this product are as follows: Direct materials (3 lb. @ $2 per lb.) Direct labor (0.5 hr. @ $8 per hr.).. Variable overhead (0.5 hr. @ $4 per hr.) Total standard cost per unit ******** ********* ******* ****** Direct materials (74,000 lb. @ $1.80).. Direct labor (13,000 hr. @ $8.10). Variable overhead Total actual cost *** *************** **** ************ .... ********** The actual level of production was 24,000 units, with the following actual total costs incurred: ************** Per Unit $6 ************* *************** $12 Total Cost $133,200 105,300 50,200 $288,700 Required a. Calculate the variances for materials, labor, and variable overhead. b. Is the difference between total actual cost and total standard cost equal to the sum of all the variances? Why?
Crenshaw Manufacturing, Inc. planned to produce 25,000 units of its only product during the year. The standard cost data for this product are as follows: Direct materials (3 lb. @ $2 per lb.) Direct labor (0.5 hr. @ $8 per hr.).. Variable overhead (0.5 hr. @ $4 per hr.) Total standard cost per unit ******** ********* ******* ****** Direct materials (74,000 lb. @ $1.80).. Direct labor (13,000 hr. @ $8.10). Variable overhead Total actual cost *** *************** **** ************ .... ********** The actual level of production was 24,000 units, with the following actual total costs incurred: ************** Per Unit $6 ************* *************** $12 Total Cost $133,200 105,300 50,200 $288,700 Required a. Calculate the variances for materials, labor, and variable overhead. b. Is the difference between total actual cost and total standard cost equal to the sum of all the variances? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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:Crenshaw Manufacturing, Inc. planned to produce 25,000 units of its only product during the year. The standard
cost data for this product are as follows:
Direct materials (3 lb. @ $2 per lb.)
Direct labor (0.5 hr. @ $8 per hr.)..
Variable overhead (0.5 hr. @ $4 per hr.)
Total standard cost per unit.
****...
The actual level of production was 24,000 units, with the following actual total costs incurred:
Total Cost
$133,200
105,300
50,200
$288,700
Direct materials (74,000 lb. @ $1.80).
Direct labor (13,000 hr. @ $8.10).
Variable overhead
Total actual cost
******
.....
Per Unit
$6
4
2
$12
...
Required
a. Calculate the variances for materials, labor, and variable overhead.
b. Is the difference between total actual cost and total standard cost equal to the sum of all the variances?
Why?
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