Penny Company manufactures only one product and uses a standard cost system. The following information is from Penny’s records for May: Direct labor rate variance: $15,000 favorable Direct labot time variance: $ 25,000 unfavorable Standard hours per unit produced: 2.5 Standard rate per hour: $25 During May, the company used 12.5% more hours than the standard allowed. What were the total standard hours allowed for the units manufactured during the month? What were the actual hours worked? How many actual units were produced during May?
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.
Penny Company manufactures only one product and uses a
Direct labor rate variance: $15,000 favorable
Direct labot time variance: $ 25,000 unfavorable
Standard hours per unit produced: 2.5
Standard rate per hour: $25
During May, the company used 12.5% more hours than the standard allowed.
- What were the total standard hours allowed for the units manufactured during the month?
- What were the actual hours worked?
- How many actual units were produced during May?
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