Eagle Company uses a standard cost system that has provided the following data: Units of output manufactured: 85 Direct labor: Standard hours allowed: 2 hours per unit of product Standard wage rate: $17.00 per hour Actual direct labor: 190 hours, total cost of $3,610 The direct labor efficiency variance for the period was: Multiple Choice $380 favorable. $380 unfavorable. $340 favorable. $340 unfavorable.
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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Eagle Company uses a standard cost system that has provided the following data:
| Units of output manufactured: | 85 | ||
| Direct labor: | |||
| Standard hours allowed: | 2 | hours per unit of product | |
| Standard wage rate: | $17.00 | per hour | |
| Actual direct labor: | 190 | hours, total cost of $3,610 | |
The direct labor efficiency variance for the period was:
-
$380 favorable.
-
$380 unfavorable.
-
$340 favorable.
-
$340 unfavorable.
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