Direct material (6 kgs at RM4 per kg) Direct labour | (1 hour at RM7 per hour) Variable production overhead (1 direct labour hour at RM3) 24 7 ww ww 34 In July, 18,500 bottles were produced. A total of 113, 500 kgs for the costs of RM442,650 of direct materials were purchased and used. The direct labour costed RM129,940 for a total of 17,800 direct labour hours worked. Actual variable production overhead costs incurred was RM58,800. ww
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.
From the foregoing information, compute the following variances and indicate whether they are favorable (F) or unfavorable (U). State why each of the variances occurred.
- Material price variance and Material usage variance
- Direct labour rate variance and Direct labour efficiency variance
- Variable
overhead spending variance and Variable overhead efficiency variance
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