The Costmore Company uses standard costing and has established the following standards for direct materials and direct labor for each unit it makes Direct Materials 5 gallons at $9.00 per gallon Direct Labor 1.5 hour at $19.50 per hour During July, the company made 7,000 units of product and used 19,500 gallons. The actual price paid for materials was $8.60 per gallon Direct Labor used was 7,200 hours and workers were paid $20.75 per hour. An analysis would indicate Multiple Choice $139.500 favourable materials quantity variance
The Costmore Company uses standard costing and has established the following standards for direct materials and direct labor for each unit it makes Direct Materials 5 gallons at $9.00 per gallon Direct Labor 1.5 hour at $19.50 per hour During July, the company made 7,000 units of product and used 19,500 gallons. The actual price paid for materials was $8.60 per gallon Direct Labor used was 7,200 hours and workers were paid $20.75 per hour. An analysis would indicate Multiple Choice $139.500 favourable materials quantity variance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:The Costmore Company uses standard costing and has established the following standards for direct materials and direct labor for each unit it makes:
Direct Materials 5 gallons at $9.00 per gallon
Direct Labor 1.5 hour at $19.50 per hour
During July, the company made 7,000 units of product and used 19,500 gallons. The actual price paid for materials was $8.60 per gallon.
Direct Labor used was 7,200 hours and workers were paid $20.75 per hour.
An analysis would indicate
Multiple Choice
$139,500 favourable materials quantity variance
$7,800 unfavourable materials quantity variance
$147,300 unfavourable materials quantity variance
$147.300 favourable materials quantity variance
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