How many lumber cuts should have been used? (standard quantity) How many lumber cuts cost should have been used? (standard material cost) How many labor hours should have been spent
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.
- Materials and Labor
Variance Analysis
Upuan Company uses a
|
Inputs |
Standards |
|
Direct Materials |
5 lumber cuts per chair at P100.00 per lumber cuts |
|
Direct Labor |
1 labor hour per chair at P50.00 per hour |
At the start of the month, the budget includes a planned production of 150 units of chair based on normal capacity; at the end of the month, actual production was 180 units of chairs, which resulted to using 950 lumber cuts, purchased at a cost of P120.00 per lumber cuts.
Required:
- Based on ACTUAL production of 180 units:
- How many lumber cuts should have been used? (standard quantity)
- How many lumber cuts cost should have been used? (standard material cost)
- How many labor hours should have been spent? (standard hour)
- How many labor cost should have been incurred? (standard labor cost)
- Determine the following:
- Materials
Budget Variance - Materials Standard Cost Variance
- Materials Quantity Variance
- Materials Price Variance
- During the month, a total payroll of P7,200 was paid to laborers, working 160 labor hours, to produce the 180 units of chairs. Determine the following:
- Total labor Variance
- Labor Efficiency Variance
- Labor Rate Variance
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