Sheldon Company manufactures only one product and uses a standard cost system. During the past month, manufacturing operations for the company had the following variances: direct labor rate variance = $27,000 favorable; direct labor efficiency variance = $55,000 unfavorable. Sheldon allows 4 standard direct labor hours per unit produced, and its standard direct labor hourly pay rate is $50. During the month, the company used 20% more direct labor hours than the standard allowed for the output achieved.
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.
Sheldon Company manufactures only one product and uses a standard cost system. During the past month, manufacturing operations for the company had the following variances: direct labor rate variance = $27,000 favorable; direct labor efficiency variance = $55,000 unfavorable. Sheldon allows 4 standard direct labor hours per unit produced, and its standard direct labor hourly pay rate is $50. During the month, the company used 20% more direct labor hours than the standard allowed for the output achieved.
What was the direct labor flexible-
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$28,000 unfavorable.
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$33,600 unfavorable.
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$32,400 favorable.
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$66,000 unfavorable.
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$82,000 unfavorable.
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