variance iv. Direct labour efficiency variance v. Direct labour rate variance vi. Direct labour total 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.
START AT IV.
Brier Company, manufacturer of car seat covers, provided the following standard costs for
its product:
Standard Standard Cost Standard Cost
Inputs Quantity ($) per Unit ($)
Direct materials 7.1 pounds 5 per pound 35.50
Direct labour 0.8 hours 17 per hour 13.60
Variable overheads 0.8 hours 7 per hour 5.60
The company reported the following in 2022 May:
Original budgeted output 4 700 units
Actual output 4 500 units
Actual direct labour hours 3 610 hours
Actual cost of direct labour $65 341
Purchases of raw materials 36 500 pounds
Actual price paid for raw materials $186 150
Raw materials used 34 150 pounds
Actual variable overhead cost $24 909
Variable overhead is applied on the basis of direct labour hours.
A. Compute the following:
i. Direct materials quantity variance
ii. Direct materials price variance
iii. Direct materials total variance
iv. Direct labour efficiency variance
v. Direct labour rate variance
vi. Direct labour total variance
vii. Variable overhead efficiency variance
viii. Variable overhead rate variance
B. State TWO (2) benefits of
C. What are TWO (2) limitations of standard costing
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