The Schuyler Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labour: Direct materials: 10 lb. at $4.50 per lb. $45.00 Direct manufacturing labour: 0.5 hours at $30 per hour 15.00 The number of finished units budgeted for January 2020 was 10,000; 9,850 units were actually produced. Actual results in January 2020 were as follows: Direct materials: 98,055 lb. used Direct manufacturing labour: 4,900 hours $154,350 Assume that there was no beginning inventory of either direct materials or finished units. During the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage. Compute the January 2020 price and efficiency variances of direct materials and direct manufacturing labour. Prepare journal entries to record the variances in requirement 1. Comment on the January 2020 price and efficiency variances of Schuyler Corporation. Why might Schuyler calculate direct materials price variances and direct materials efficiency variances with references to different points in time
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 Schuyler Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labour:
Direct materials: 10 lb. at $4.50 per lb. $45.00
Direct manufacturing labour: 0.5 hours at $30 per hour 15.00
The number of finished units budgeted for January 2020 was 10,000; 9,850 units were actually produced.
Actual results in January 2020 were as follows:
Direct materials: 98,055 lb. used
Direct manufacturing labour: 4,900 hours $154,350
Assume that there was no beginning inventory of either direct materials or finished units. During the month, materials purchased amounted to 100,000 lb., at a total cost of $465,000. Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage.
- Compute the January 2020 price and efficiency variances of direct materials and direct manufacturing labour.
- Prepare
journal entries to record the variances in requirement 1. - Comment on the January 2020 price and efficiency variances of Schuyler Corporation.
- Why might Schuyler calculate direct materials price variances and direct materials efficiency variances with references to different points in time?
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