In December, Sam Antari, president of Antari Inc., received the following information from Denise Sweet, the new controller, in regard to November production of travel bags: November production ............ 4,800 bags Actual cost of material purchased and used .. $14,550 Standard material allowed ........... 0.5 square yard per bag Material quantity variance .......... $600 U Standard price per yard of material ......... $6 Actual hours worked ............ 9,760 hours Standard labor time per bag .......... 2 hours Labor rate variance ............. $1,464 F Standard labor rate per hour .......... $17 Antari asked Sweet to provide the following information: d. Labor efficiency variance. e. Standard prime (direct material and direct labor) cost to produce one travel bag. f. Actual cost to produce one travel bag in November.
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.
In December, Sam Antari, president of Antari Inc., received the following information from Denise Sweet, the new controller, in regard to November production of travel bags:
November production ............ 4,800 bags
Actual cost of material purchased and used .. $14,550
Standard material allowed ........... 0.5 square yard per bag Material quantity variance .......... $600 U
Standard price per yard of material ......... $6
Actual hours worked ............ 9,760 hours
Standard labor time per bag .......... 2 hours
Labor rate variance ............. $1,464 F
Standard labor rate per hour .......... $17
Antari asked Sweet to provide the following information:
d. Labor efficiency variance.
e. Standard prime (direct material and direct labor) cost to produce one travel bag.
f. Actual cost to produce one travel bag in November.
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