The following standard cost data are for Dito Ltd. for January 2019: Per unit: Direct material 15kg@$5/kg Direct labour 4hr@$12/hr During January, Dito produced 720 units of output, which was 30 units less than expected. Direct material purchased and used was 10,500 kg @ $5.25/kg. Direct labour was 2,900 hours @ 12.25/hr. Required: 1. What were the price and quantity variances for direct material, respectively? 2. What were the rate and efficiency variances for direct labour, respectively?
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
Per unit:
Direct material 15kg@$5/kg
Direct labour 4hr@$12/hr
During January, Dito produced 720 units of output, which was 30 units less than expected. Direct material purchased and used was 10,500 kg @ $5.25/kg. Direct labour was 2,900 hours @ 12.25/hr.
Required:
1. What were the price and quantity variances for direct material, respectively?
2. What were the rate and efficiency variances for direct labour, respectively?
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