XYZ Corp operates under system of standard Costing within a single cost centre. The standard cost details are as follows: Direct material – 5kg @ $4.2 Direct labor - 3 hours @ $3 Factory overhead - $1.2 per labor hour. The budgeted production schedule for the month of May,2019 was 40,000 units.However, 40,960 units were completed during the month. No opening or closing Work-in-progress. Purchases during the month were 225,000 kg of material @$4.5 per kg. Actual Production and Sales record for the month: Materials used 205,600 kgs Direct Labor Cost (121,200 hrs) $ 387,840 Factory Overhead Cost $ 100,000 Sales 40,000 units. Selling Price shall have a mark-up of 20% on selling price. 1. Calculated material variance. 2. Calculated Labor Variances 3. Calculated Factory overhead 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.
XYZ Corp operates under system of
centre. The standard cost details are as follows:
Direct material – 5kg @ $4.2
Direct labor - 3 hours @ $3
Factory
The budgeted production schedule for the month of May,2019 was 40,000 units.However, 40,960 units were completed during the month. No opening or closing Work-in-progress. Purchases during the month were 225,000 kg of material @$4.5 per kg.
Actual Production and Sales record for the month:
Materials used 205,600 kgs
Direct Labor Cost (121,200 hrs) $ 387,840
Sales 40,000 units.
Selling Price shall have a mark-up of 20% on selling price.
1. Calculated material variance.
2. Calculated Labor Variances
3. Calculated Factory overhead Variance.
4. Prepare Income Statement for May 2019 showing actual Gross Margin.
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