O,Shea Company manufactures ceramic vases. It uses a standard costing system when developing its flexible-budget amounts. In April 2009, 2,000 finished units were produced. The following information relates to its two direct manufacturing cost categories: Direct Materials and Direct Labour. Direct Materials used were 4,400 kilograms (kg). The standard direct materials input allowed for one output unit is 2 kilograms at $15 per kilogram. O’Shea purchased 5,000 kilograms of materials at $16.50 per kilogram, a total of $82,500. Actual direct manufacturing labour-hours were 3,250 at a total cost of $66,300. Standard manufacturing labour time allowed is 1.5 hours per output unit, and the standard direct manufacturing labour cost is $20 per hour. Required 1. Calculate the following Variances, State whether each variance is favourable or unfavourable. Direct materials price variance and efficiency variance Direct labour rate variance and efficiency variance. Give two explanations for each of the variance calculated in requirements
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.
O,Shea Company manufactures ceramic vases. It uses a
Direct materials price variance and efficiency variance Direct labour rate variance and efficiency variance.
Give two explanations for each of the variance calculated in requirements
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