Lopex Corporation manufactures a product with the following standard costs: Input Direct materials (DM) 26 sq ft. @ $14 sq ft Direct manufacturing labour(DML) 6 hours@ $11 per hour Its standard cost of a furniture set, based on a denominator level of 4,000 output units per year (24,000 labour hours) The records for January indicate the following: Direct materials purchased Direct materials used Direct manufacturing labour Actual production 130,000 sq ft @ $13 sq ft 110,000 sq ft 28,400 hours at $12 per hour 4,400 output units For the month of January, compute the following variances, indicating whether each is favorable (F) or unfavorable (U). Direct materials price variance Direct materials efficiency variance Direct labour price variance Direct labour efficiency variance
Lopex Corporation manufactures a product with the following standard costs: Input Direct materials (DM) 26 sq ft. @ $14 sq ft Direct manufacturing labour(DML) 6 hours@ $11 per hour Its standard cost of a furniture set, based on a denominator level of 4,000 output units per year (24,000 labour hours) The records for January indicate the following: Direct materials purchased Direct materials used Direct manufacturing labour Actual production 130,000 sq ft @ $13 sq ft 110,000 sq ft 28,400 hours at $12 per hour 4,400 output units For the month of January, compute the following variances, indicating whether each is favorable (F) or unfavorable (U). Direct materials price variance Direct materials efficiency variance Direct labour price variance Direct labour efficiency variance
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:Lopex Corporation manufactures a product with the following standard costs:
Input
Direct materials (DM)
26 sq ft. @ $14 sq ft
Direct manufacturing labour(DML)
6 hours@ $11 per hour
Its standard cost of a furniture set, based on a denominator level of 4,000 output units per year (24,000 labour hours)
The records for January indicate the following:
Direct materials purchased
Direct materials used
Direct manufacturing labour
Actual production
130,000 sq ft @ $13 sq ft
110,000 sq ft
28,400 hours at $12 per hour
4,400 output units
For the month of January, compute the following variances, indicating whether each is favorable (F) or unfavorable (U).
Direct materials price variance
Direct materials efficiency variance
Direct labour price variance
Direct labour efficiency variance
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