Per Set of Covers $22.40 27.00 Total Direct materials ... Direct labor... Variable manufacturing overhead (based on direct labor-hours) . $42,560 $51,300 $6,840 3.60 $53.00 Per Set of Covers Total Direct materials (12,000 yards).. Direct labor..... Variable manufacturing overhead $22.80 24.50 3.50 $45,600 $49,000 $7,000 $50.80
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.
Comprehensive
Marvel Parts Inc. manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company uses a
During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month.
At standard, each set of covers should require 5.6 yards of material. All of the materials purchased during the month were used in production.
Required:
Compute the following variances August:
1. The materials price and quantity variances.
2. The labor rate and efficiency variances.
3. The variable overhead rate and efficiency variances.
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