The following information was obtained from KMG Manufacturing Company. Standard Data: Direct material 4 yards @ $4 per yard Direct labour 3 hours @ $6 per hour Variable manufacturing overheads $2 per hour Actual Data: Direct material 48,000 yards @ $4.20 per yard Direct labour 34,000 hours @ $5.20 per hour Variable manufacturing overhead 34,000 hours totalling $80,000 Actual units produced 18,000
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.
The following information was obtained from KMG Manufacturing Company.
Standard Data:
Direct material 4 yards @ $4 per yard
Direct labour 3 hours @ $6 per hour
Variable manufacturing
Actual Data:
Direct material 48,000 yards @ $4.20 per yard
Direct labour 34,000 hours @ $5.20 per hour
Variable manufacturing overhead 34,000 hours totalling $80,000
Actual units produced 18,000
Required:
1. Variable Manufacturing Overhead Rate.
2. Variable Manufacturing Overhead Efficiency.
3. Give One (1) possible cause of an adverse material price variance.
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