TB Problem Qu. 11-170 Zee Corporation has developed the following... Zee Corporation has developed the following cost standards for the production of its leather backpacks: Standard Cost Per Backpack Leather (1.8 yards × $27 per yard) $48.60 Direct labor (2.1 hours × $12.00 per hour) $25.20 Variable overhead (2.1 hours × $17.60 per hour) $36.96
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.
TB Problem Qu. 11-170 Zee Corporation has developed the following...
Zee Corporation has developed the following
| Standard Cost Per Backpack | |
| Leather (1.8 yards × $27 per yard) | $48.60 |
| Direct labor (2.1 hours × $12.00 per hour) | $25.20 |
| Variable |
$36.96 |
|
|
Variable overhead at Zee is applied on the basis of direct labor hours. The actual results for last month were as follows:
| Number of backpacks produced | 11,500 |
| Direct labor hours incurred | 23,390 |
| Yards of leather purchased | 22,260 |
| Yards of leather used in production | 21,720 |
| Cost of leather purchased | $566,517 |
| Direct labor cost | $252,612 |
| Variable overhead cost | $416,342 |
|
|
The direct materials purchases variance is computed when the materials are purchased.
Required:
Compute the following variances for Zee.
a. Materials price variance.
b. Materials quantity variance.
c. Labor efficiency variance.
d. Variable overhead rate variance.
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