Standard Quantity or Hours 4.6 pounds Standard Price or Rate $2.50 per pound $18.00 per hour Standard Cost Direct materials Direct labor. $11.50 0.2 hours $3.60
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.
Direct Materials and Direct Labor Variances
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:
During the most recent month, the following activity was recorded:
a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound.
b. All of the material purchased was used to produce 4,000 units of Zoom.
c. 750 hours of direct labor time were recorded at a total labor cost of $14,925.
Required:
1. Compute the materials price and quantity variances for the month.
2. Compute the labor rate and efficiency variances for the month.
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