Exercise 16-39 (Algo) Variable Cost Variances (LO 16-5) The records of Norton, Inc. show the following for July. Standard labor-hours allowed per unit of output 1.6 Standard variable overhead rate per standard direct labor-hour $ 31 Good units produced 60,000 Actual direct labor-hours worked 98,000 Actual total direct labor $ 2,188,000 Direct labor efficiency variance $ 40,000 U Actual variable overhead $ 2,940,000 Required: Compute the direct labor and variable overhead price and efficiency variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
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.
Exercise 16-39 (Algo) Variable Cost Variances (LO 16-5)
The records of Norton, Inc. show the following for July.
| Standard labor-hours allowed per unit of output | 1.6 | ||
| Standard variable |
$ | 31 | |
| Good units produced | 60,000 | ||
| Actual direct labor-hours worked | 98,000 | ||
| Actual total direct labor | $ | 2,188,000 | |
| Direct labor efficiency variance | $ | 40,000 | U |
| Actual variable overhead | $ | 2,940,000 | |
Required:
Compute the direct labor and variable overhead price and efficiency variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
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