Mom’s Apple Pie Company uses a standard cost system. The standard direct labor time for each pie is10 minutes. During the most recent month, the company produced and sold 6,000 pies. The standarddirect labor rate is $8 per hour; the actual labor rate per hour for the month was $8.40. The companyused a total of 980 labor hours. (a) What was the direct labor efficiency variance for the month?(Round your answer to 2 decimal places.) (b) Was this variance favorable (F) or unfavorable (U)?
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.
Mom’s Apple Pie Company uses a
10 minutes. During the most recent month, the company produced and sold 6,000 pies. The standard
direct labor rate is $8 per hour; the actual labor rate per hour for the month was $8.40. The company
used a total of 980 labor hours. (a) What was the direct labor efficiency variance for the month?
(Round your answer to 2 decimal places.) (b) Was this variance favorable (F) or unfavorable (U)?
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