Monty Company produces chairs and has determined the following direct cost categories and budgeted amounts: Category Standard Inputs for 1 output Standard Cost per input Direct Materials 1 7.5 Direct Labor 0.3 9 Direct Marketing 0.5 3 Actual performance for the company is shown below: Actual output (in units): 4,000 Direct Materials: Materials costs: $30,225 Input purchased and used: 3,900 Actual price per input: $7.75 Direct Manufacturing Labor: Labor costs: $11,470 Labor-hours of input: 1,240 Actual price per hour: $9.25 Direct Marketing Labor: Labor costs: $5,880 Labor-hours of input: 2,100 Actual price per hour: $2.8 What is the combined total of the flexible-budget variances? What is the price variance of the direct materials? What is the price variance of the direct manufacturing labor and the direct marketing labor, respectively
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.
Monty Company produces chairs and has determined the following direct cost categories and budgeted amounts:
|
Category |
Standard Inputs for 1 output |
Standard Cost per input |
|
Direct Materials |
1 | 7.5 |
|
Direct Labor |
0.3 | 9 |
|
Direct Marketing |
0.5 | 3 |
Actual performance for the company is shown below:
Actual output (in units): 4,000
Direct Materials:
Materials costs: $30,225
Input purchased and used: 3,900
Actual price per input: $7.75
Direct Manufacturing Labor:
Labor costs: $11,470
Labor-hours of input: 1,240
Actual price per hour: $9.25
Direct Marketing Labor:
Labor costs: $5,880
Labor-hours of input: 2,100
Actual price per hour: $2.8
-
What is the combined total of the flexible-
budget variances ? -
What is the price variance of the direct materials?
-
What is the price variance of the direct manufacturing labor and the direct
marketing labor, respectively?
-
What is the efficiency variance for direct materials?
-
What are the efficiency variances for direct manufacturing labor and direct
marketing labor, respectively?
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Monty Company produces chairs and has determined the following direct cost categories and budgeted amounts:
|
Category |
Standard Inputs for 1 output |
Standard Cost per input |
|
Direct Materials |
1 | 7.5 |
|
Direct Labor |
0.3 | 9 |
|
Direct Marketing |
0.5 | 3 |
Actual performance for the company is shown below:
Actual output (in units): 4,000
Direct Materials:
Materials costs: $30,225
Input purchased and used: 3,900
Actual price per input: $7.75
Direct Manufacturing Labor:
Labor costs: $11,470
Labor-hours of input: 1,240
Actual price per hour: $9.25
Direct Marketing Labor:
Labor costs: $5,880
Labor-hours of input: 2,100
Actual price per hour: $2.8
4. What is the efficiency variance for direct materials?
5. What are the efficiency variances for direct manufacturing labor and direct
marketing labor, respectively?
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