Your company expected to produce 200 units during July. Each unit was expected to require 2 hours of direct labor. Labor cost was expected to be $10 per hour. Your company actually produced and sold 220 units and used an average of 2.1 labor hours per unit. An actual labor rate was $9.8 per hour. Determine the labor rate and usage 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.
RM1.
Your company expected to produce 200 units during July. Each unit was expected to require 2 hours of direct labor. Labor cost was expected to be $10 per hour. Your company actually produced and sold 220 units and used an average of 2.1 labor hours per unit. An actual labor rate was $9.8 per hour. Determine the labor rate and
usage variances.
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