DuRoss Company produces coats. The company uses a standard costing system and has set the following standards for materials and labor: Fabric (8 yards @$6) $48 Direct labor (2 hours @$18) $36 Total prime cost $84 During the year DuRoss produced 55,000 coats. Actual fabric purchased was 460,000 yards at $5.75 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 120,000 at $19.25 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.
DuRoss Company produces coats. The company uses a
| Fabric (8 yards @$6) | $48 |
| Direct labor (2 hours @$18) | $36 |
| Total prime cost | $84 |
During the year DuRoss produced 55,000 coats. Actual fabric purchased was 460,000 yards at $5.75 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 120,000 at $19.25 per hour.
A. Compute the cost of leather and direct labor that should be incurred for the production of 55,000 coats.
B. Compute the total
C. Compute the materials price variance.
D. Compute the materials usage variance.
E. Compute the labor rate variance.
F. Compute the labor efficiency variance.
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