Kildare Company manufactures 100-pound bags of mulch that have the following unit standard costs for direct materials and direct labor: Line Item Description Cost Direct materials (100 lbs. @ $0.40 per lb.) $40.00 Direct labor (0.5 hr. at $18.00 per hour) 9.00 Total standard prime cost per 100-lb. bag $49.00 The following activities were recorded for October: 2,000 bags were manufactured. 190,000 lbs. of materials costing $70,000 were purchased. 205,000 lbs. of materials were used. $19,000 was paid for 950 hours of direct labor. There were no beginning or ending work-in-process inventories. What is the labor efficiency variance for Kildare Company? a. $1,900 U b. $1,000 U c. $900 F d. $1,000 F
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.
Kildare Company manufactures 100-pound bags of mulch that have the following unit
| Line Item Description | Cost |
|---|---|
| Direct materials (100 lbs. @ $0.40 per lb.) | $40.00 |
| Direct labor (0.5 hr. at $18.00 per hour) | 9.00 |
| Total standard prime cost per 100-lb. bag | $49.00 |
The following activities were recorded for October:
- 2,000 bags were manufactured.
- 190,000 lbs. of materials costing $70,000 were purchased.
- 205,000 lbs. of materials were used.
- $19,000 was paid for 950 hours of direct labor.
There were no beginning or ending work-in-process inventories.
What is the labor efficiency variance for Kildare Company?
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