Material Price Variance Material Spending Variance Labor Efficiency Variance Labor Rate Variance Labor Spending Variance
Material Price Variance Material Spending Variance Labor Efficiency Variance Labor Rate Variance Labor Spending Variance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Topic Video
Question
| Surf Inc. has the following standards. | |||
| Standard Quantity for unit of output | 3 | pounds | |
| $5.25 | |||
| Standard Direct Labor hours per unit | 20 | ||
| Standard Dir Labor Rate | $17.65 | ||
| Other Data for the month | |||
| Planned Production | 350.00 | units | |
| Actual Production | 325.00 | units | |
| Actual Material Cost | 5,200.00 | ||
| Actual Material Pounds | 1,000.00 | ||
| Actual Labor Cost | 114,570.00 | ||
| Actual Labor Rate | 17.10 | ||
| Compute the following variances and indicate if the are favorable or unfavorable | |||
| Variance | Is the variance Favorable or Unfavorable | ||
| Material Quantity Variance | |||
| Material Price Variance | |||
| Material Spending Variance | |||
| Labor Efficiency Variance | |||
| Labor Rate Variance | |||
| Labor Spending Variance | |||
| Show your work for the above answers | |||
| Description | Actual Cost | Standard Cost | |
| Material | |||
| Labor | |||
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