Ipad Man Inc. has provided the following standard direct labor cost for its product: Standard direct labor is 2 hours per unit of the product. Standard rate is P15 per direct labor hours. During the year, the company produced 1,000 units of the product through 1,800 direct labor hours at a total labor cost of P36,000. The journal entry to record the labor variances will include Debit to direct labor rate variance of P9,000 Debit to direct labor efficiency variance of P3,000 Credit to salaries payable of P30,000 Debit to work in process of P36,000
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.
Ipad Man Inc. has provided the following standard direct labor cost for its product:
- Standard direct labor is 2 hours per unit of the product.
- Standard rate is P15 per direct labor hours.
During the year, the company produced 1,000 units of the product through 1,800 direct labor hours at a total labor cost of P36,000.
The
- Debit to direct labor rate variance of P9,000
- Debit to direct labor efficiency variance of P3,000
- Credit to salaries payable of P30,000
- Debit to work in process of P36,000
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