Answered: Shimano Manufacturing makes a product…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 7PB: Marymount Company makes one product. In the month of April, it made 3,500 units. Workers were paid...

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Shimano Manufacturing makes a product that is expected to require 4 hours of labor per unit of product. The standard cost of labor is $6.50 per hour. Shimano actually used 3.80 hours of labor per unit of product. The actual cost of labor was $6.40 per hour. Shimano produced 1,600 units during the period. Based on this information alone, what is the labor price variance?

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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