The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: Compute the materials quantity variance. . Compute the materials price variance. Compute the labor efficiency variance. Compute the labor rate variance.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: Compute the materials quantity variance. . Compute the materials price variance. Compute the labor efficiency variance. Compute the labor rate variance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:Sakelaris Corporation makes a product with the following standard costs:
Standard Quantity or
Hours
Direct materials 8.6
Direct labor 0.4
Variable
overhead
0.4
Actual direct labor-hours
Actual direct labor cost
Standard Price or
Rate
Actual variable overhead cost
kilos
hours
hours
3,320
The company reported the following results concerning this product in August.
Actual output
Raw materials used in production
Purchases of raw materials
8,400 units
71,750 kilos
76,900 kilos
Actual cost of raw materials purchases $469,090
$ 35,524
$ 17,928
$6.00 per kilo
hours
$
per
11.00 hour
$5.00
per
hour
Transcribed Image Text:The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
Required:
Compute the materials quantity variance.
Compute the materials price variance.
Compute the labor efficiency variance.
Compute the labor rate variance.
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