Pretty Draperies manufactures curtains. A certain window requires the following: Direct materials standard: 10 square yards at $5 per yard Direct labor standard: 5 hours at $10 During the second quarter, the company made 1,500 curtains and used 14,000 square yards of fabric costing $68,600. Actual direct labor hours used totaled 7,600 hours for $79,800. Compute the direct manufacturing labor rate (price) and quantity (efficiency) variances for the quarter (show calculations): DL rate variance $_____________________ Circle one: Favorable Unfavorable DL quantity variance $__________________ Circle one: Favorable Unfavorable Prepare (1) journal entry to record the variances and (2) to close variance accounts assuming that variances are immaterial:
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.
- Pretty Draperies manufactures curtains. A certain window requires the following:
Direct materials standard: 10 square yards at $5 per yard
Direct labor standard: 5 hours at $10
During the second quarter, the company made 1,500 curtains and used 14,000 square yards of fabric costing $68,600. Actual direct labor hours used totaled 7,600 hours for $79,800.
Compute the direct manufacturing labor rate (price) and quantity (efficiency) variances for the quarter (show calculations):
DL rate variance $_____________________
Circle one: Favorable Unfavorable
DL quantity variance $__________________
Circle one: Favorable Unfavorable
Prepare (1)
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