The planned activity level for the assembly department of the Shields Company during the month of December was 10,000 direct labor hours. The actual number of direct labor hours worked during December was 9,000. Overhead is allocated on the basis of actual direct labor hours. What kind of variance occurred? an unfavorable labor rate variance
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 planned activity level for the assembly department of the Shields Company during the month of December was 10,000 direct labor hours. The actual number of direct labor hours worked during December was 9,000.
- an unfavorable labor rate variance
- an unfavorable labor efficiency variance
- a favorable overhead volume variance
- an unfavorable overhead volume variance
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