Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: Cost Category Standard Cost per 100 Two-Liter Bottles Direct labor $1.16 Direct materials 5.56 Factory overhead 0.4 Total $7.12 At the beginning of July, GBC management planned to produce 550,000 bottles. The actual number of bottles produced for July was 594,000 bottles. The actual costs for July of the current year were as follows: Cost Category Actual Cost for the Month Ended July 31 Direct labor $6,753 Direct materials 32,234 Factory overhead 2,400 Total $41,387 Enter all amounts as positive numbers.
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.
Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The
| Cost Category | Standard Cost per 100 Two-Liter Bottles |
|||||
| Direct labor | $1.16 | |||||
| Direct materials | 5.56 | |||||
| Factory |
0.4 | |||||
| Total | $7.12 |
At the beginning of July, GBC management planned to produce 550,000 bottles. The actual number of bottles produced for July was 594,000 bottles. The actual costs for July of the current year were as follows:
| Cost Category | Actual Cost for the Month Ended July 31 |
|||||||||
| Direct labor | $6,753 | |||||||||
| Direct materials | 32,234 | |||||||||
| Factory overhead | 2,400 | |||||||||
| Total | $41,387 |
Enter all amounts as positive numbers.
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