Tico Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.025 hour. During the month of April, 1,000,000 bottles were produced using 24,400 labor hours @ $15.00. The standard wage rate is $13.00 per hour. Required: Calculate the labor rate and efficiency variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable.
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.
Labor Rate and Efficiency Variances
Tico Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.025 hour. During the month of April, 1,000,000 bottles were produced using 24,400 labor hours @ $15.00. The standard wage rate is $13.00 per hour.
Required:
Calculate the labor rate and efficiency variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable.
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