ngel Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 4.3 pounds $6.00 per pound $25.80 Direct Labor 0.7 hours $20.00 per hour $14.00 Variable Overhead 0.7 hours $2.00 per hour $1.40 The company reported the following results concerning this product in September. Originally budgeted output 1,900 units Actual output 1,700 units Raw materials purchased and used in production 7,210 pounds Actual direct labor-hours 1,260 hours Actual cost of raw materials purchased $41,097 Actual direct labor cost $25,578 Actual variable overhead cost $2,394 The company applies variable overhead on the basis of direct labor-hours. a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. Show your workings please
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.
Ingel Corporation makes a product with the following standard costs:
| Standard Quantity or Hours | Standard Price or Rate | Standard Cost Per Unit | |
| Direct materials | 4.3 pounds | $6.00 per pound | $25.80 |
| Direct Labor | 0.7 hours | $20.00 per hour | $14.00 |
| Variable |
0.7 hours | $2.00 per hour | $1.40 |
The company reported the following results concerning this product in September.
|
Originally budgeted output |
1,900 units |
| Actual output | 1,700 units |
| Raw materials purchased and used in production | 7,210 pounds |
| Actual direct labor-hours | 1,260 hours |
| Actual cost of raw materials purchased | $41,097 |
| Actual direct labor cost | $25,578 |
| Actual variable overhead cost | $2,394 |
The company applies variable overhead on the basis of direct labor-hours.
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
Show your workings please
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