Standard Cost Information Quantity Cost Direct Materials 2 parts S0.15 per part Direct Labor 0.02 hours 8.00 per hour Variable Manufacturing Overhead 0.02 hours 10.00 per hour Fixed Manufacturing Overhead ($28,500 for static budget volume of 95,000 units and 1,900 hours, or $15 per hour) Actual Cost Information Direct Materials (209,000 parts e S0.20 per part) $ 41,800 Direct Labor (1,600 hours e S8.15 per hour) 13,040 Variable Manufacturing Overhead 9,000 Fixed Manufacturing Overhead 26,000
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.
Computing
Hear Smart manufactures headphone cases. During September 2018, the company produced and sold 105,000 cases and recorded the following cost data:
Requirements
- Compute the cost and efficiency variances for direct materials and direct labor.
- For manufacturing
overhead , compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. - Hear Smarts management used better quality materials during September. Discuss the trade-off between the two direct material variances.
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