New Jersey Valve Company manufactured 7,400 units during January of a control valve used by milk processors in its Camden plant. Records indicated the following: Direct labor Direct material purchased Direct material used 45,300 hour at $15.40 per hour 32,000 pounds at $2.80 per pound 29,300 pounds The control valve has the following standard prime costs: Direct material Direct labor Standard prime cost per unit 4 pounds at $2.70 per pound 6 hour at $15.80 per hour. $ 10.80 94.80 $ 105.60 Required: 1. Prepare a schedule of standard production costs for January, based on actual production of 7,400 units. 2. For the month of January, compute the following variances.
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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Prepare a schedule of
standard production costs for January, based on actual production of 7,400 units.
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