Yong Trading has the following standard cost for its product: Direct material - 5 kg x $28/kg Direct labour - 6.5 hours x $33/hour Additional information for the month of January 2020: Units made - 1,300 Direct material bought - 2,450 kg for $63,700 Direct material used - 7,100 kg Direct labour - 6,300 hours (direct labour cost of $195,300 Requirements: a ) Calculate 1)Direct material price variance 2)Direct material quantity variance 3)Direct Labour rate variance 4) Direct labour efficiency variance determine whether each variance if favourable or unfavourable.
Yong Trading has the following standard cost for its product: Direct material - 5 kg x $28/kg Direct labour - 6.5 hours x $33/hour Additional information for the month of January 2020: Units made - 1,300 Direct material bought - 2,450 kg for $63,700 Direct material used - 7,100 kg Direct labour - 6,300 hours (direct labour cost of $195,300 Requirements: a ) Calculate 1)Direct material price variance 2)Direct material quantity variance 3)Direct Labour rate variance 4) Direct labour efficiency variance determine whether each variance if favourable or unfavourable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Yong Trading has the following standard cost for its product:
Direct material - 5 kg x $28/kg
Direct labour - 6.5 hours x $33/hour
Additional information for the month of January 2020:
Units made - 1,300
Direct material bought - 2,450 kg for $63,700
Direct material used - 7,100 kg
Direct labour - 6,300 hours (direct labour cost of $195,300
Requirements:
a ) Calculate
1)Direct material price variance
2)Direct material quantity variance
3)Direct Labour rate variance
4) Direct labour efficiency variance
determine whether each variance if favourable or unfavourable.
b) why favorable direct labour efficiency variance occur?
c) Discuss the usefulness of variance analysis to this company.
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