Escuchar Products, a producer of DVD players, has established a labor standard for its product-direct labor: 3 hrs at $9.55 per hour. During January, Escuchar produced 12,800 DVD players. The actual direct labor used was 37,840 hours at a total cost of $367,048. Required: 1. Compute the labor rate and efficiency variances. 2. Prepare journal entries on Jan. 31 for all activities relating to labor.
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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