Sunland Family Instruments makes cellos. During the past year, the company made 6,610 cellos even though the budget planned for only 5,620. The company paid its workers an average of $20 per hour, which was $0.50 higher than the standard labor rate. The production manager budgets 4 direct labor hours per cello. During the year, a total of 24,510 direct labor hours were worked. (a) Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
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.
Sunland Family Instruments makes cellos. During the past year, the company made 6,610 cellos even though the budget planned for only 5,620. The company paid its workers an average of $20 per hour, which was $0.50 higher than the standard labor rate. The production manager budgets 4 direct labor hours per cello. During the year, a total of 24,510 direct labor hours were worked.
(a) Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
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