The company produces product A. The company uses marginal costing system. The standard cost card for product is as follows: Direct materials USD 20 per unit Direct labor (6 hours at USD 7.5/hour) USD 45 per unit Variable production overhead USD 27 per unit The budgeted and actual activity levels for the last quarter were as follows: Budgeted Sales (units) 20 000 Actual 19 000 Budgeted Production 20 000 Actual 21 000 The actual costs were as follows: Direct material: USD 417 900 Direct labour: USD 949 620 Variable production overhead: USD 565 740 Required: Calculate usage and price variances for all costs. Provide at least 2 possible causes for every variance calculated.

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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.