Use the following standard cost card for 1 gallon of ice cream to answer the questions. STANDARD COST CARD Product: Gallon of Ice Cream Manufactering cost info Standard Quantity x standard cost per unitx x cost summary direct materials cream sugar 5 quarts 16 ounces x $1.15 per quart $0.08 per ounce x $5.75 $1.28 direct labor 3 min x $36.00 per hour x $1.80 total direct costs x x $8.83 Actual direct costs incurred to make 50 gallons of ice cream: 275 quarts of cream at $1.05 per quart 832 ounces of sugar at $0.075 per ounce 165 minutes of labor at $37 per hour All material used was bought during the current period. Required: Compute the material and labor variances. Comment on the results and possible causes of the variances.
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.
Use the following standard cost card for 1 gallon of ice cream to answer the questions.
STANDARD COST CARD
Product: Gallon of Ice Cream
| Manufactering cost info | Standard Quantity | x | standard cost per unitx | x | cost summary |
|
direct materials cream sugar |
5 quarts 16 ounces |
x |
$1.15 per quart $0.08 per ounce |
x |
$5.75 $1.28 |
|
direct labor
|
3 min | x | $36.00 per hour | x | $1.80 |
| total direct costs | x | x | $8.83 |
Actual direct costs incurred to make 50 gallons of ice cream:
275 quarts of cream at $1.05 per quart
832 ounces of sugar at $0.075 per ounce
165 minutes of labor at $37 per hour
All material used was bought during the current period.
Required:
Compute the material and labor variances.
Comment on the results and possible causes of the variances.
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