Upstate Co. manufactures a product that has the following standard costs per unit: Direct materials: 40 yards at $2.70 per yard $108 Direct labor: 7 hours at $18 per hour 126 Total $234 Following information pertains to July: Direct material purchased: 42,500 yards at $2.78 per yard or Rs 1181,50 Direct material used: 36,000 yards Direct labor used: 7,500 hours at $18.30 per hour or Rs 137,250 Actual completed production: 1,050 units Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is 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.
Upstate Co. manufactures a product that has the following
Direct materials: 40 yards at $2.70 per yard $108
Direct labor: 7 hours at $18 per hour 126
Total $234
Following information pertains to July:
Direct material purchased: 42,500 yards at $2.78 per yard or Rs 1181,50
Direct material used: 36,000 yards
Direct labor used: 7,500 hours at $18.30 per hour or Rs 137,250
Actual completed production: 1,050 units
Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
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