Standard costs and actual cost for direct materials, direct labor, and factory overhead incurred for the manufacture of 2,000 units of product were as follows: Standard Costs Direct materials Direct labor Factory overhead 2,000 pounds at $12.50 8,000 hours at $14 Rates per machine hour, Based on 100% of normal Capacity of 10,000 machine hours; Variable cost, $1.80 Fixed cost, $2.50 Four machine hours are required per unit. Actual Costs 1,940 pounds at $12.80 8,180 hours at $15 $15,200 variable cost $25,000 fixed cost Instructions Determine (a) the price variance, quantity variance, and total direct materials cost variance, (b) the rate variance, time variance, and total direct labor cost variance.
Standard costs and actual cost for direct materials, direct labor, and factory overhead incurred for the manufacture of 2,000 units of product were as follows: Standard Costs Direct materials Direct labor Factory overhead 2,000 pounds at $12.50 8,000 hours at $14 Rates per machine hour, Based on 100% of normal Capacity of 10,000 machine hours; Variable cost, $1.80 Fixed cost, $2.50 Four machine hours are required per unit. Actual Costs 1,940 pounds at $12.80 8,180 hours at $15 $15,200 variable cost $25,000 fixed cost Instructions Determine (a) the price variance, quantity variance, and total direct materials cost variance, (b) the rate variance, time variance, and total direct labor cost variance.
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:PROBLEM II
Standard costs and actual cost for direct materials, direct labor, and factory overhead incurred for the
manufacture of 2,000 units of product were as follows:
Standard Costs
Direct materials
Direct labor
Factory overhead
2,000 pounds at $12.50
8,000 hours at $14
Rates per machine hour,
Based on 100% of normal
Capacity of 10,000
machine hours;
Variable cost, $1.80
Fixed cost, $2.50
Four machine hours are required per unit.
Actual Costs
1,940 pounds at $12.80
8,180 hours at $15
$15,200 variable cost
$25,000 fixed cost
Instructions
Determine (a) the price variance, quantity variance, and total direct materials cost variance,
(b) the rate variance, time variance, and total direct labor cost variance.
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