Material and Labor Variances The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product: Actual Costs Standard Costs
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.
Material and Labor Variances
The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product:
| Actual Costs | Standard Costs | |||||||
|---|---|---|---|---|---|---|---|---|
| Direct material | 11,700 | lbs. @ | $5.30 | 12,000 | lbs. @ | $5.10 | ||
| Direct labor | 18,600 | hrs. @ | $8.40 | 18,000 | hrs. @ | $8.70 |
Determine the following variances:
Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.
| Materials Variances | ||
|---|---|---|
| Actual cost: | Answer | |
| Split cost: | Answer | |
| Standard cost: | Answer | |
| a. Materials price | Answer | Answer |
| b. Materials efficiency | Answer | Answer |
| Labor Variances | ||
|---|---|---|
| Actual cost: | Answer | |
| Split cost: | Answer | |
| Standard cost: | Answer | |
| c. Labor rate | Answer | Answer |
| d. Labor efficieny | Answer | Answer |
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