Standard Costing System: Standard Costing system allows estimating the costs, preparing budgets for future periods, and analyzing the performance by comparing the budgets with actual results and find variances. Variances Analysis: A Variance analysis is comparing the actual and standard figures and finding the differences or variances Direct labor variances: Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories: 1. Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows: Direct labor rate variance = ( Actual rate – Standard rate ) × Actual hours 2. Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows: Direct labor efficiency variance = ( Actual hours – Standard hours ) × Standard rate 3. Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows: Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance Or Direct Labor cost variance = Actual Labor cost – Standard Labor Cost Requirement-1: To determine: The calculation of direct labor cost variance
Standard Costing System: Standard Costing system allows estimating the costs, preparing budgets for future periods, and analyzing the performance by comparing the budgets with actual results and find variances. Variances Analysis: A Variance analysis is comparing the actual and standard figures and finding the differences or variances Direct labor variances: Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories: 1. Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows: Direct labor rate variance = ( Actual rate – Standard rate ) × Actual hours 2. Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows: Direct labor efficiency variance = ( Actual hours – Standard hours ) × Standard rate 3. Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows: Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance Or Direct Labor cost variance = Actual Labor cost – Standard Labor Cost Requirement-1: To determine: The calculation of direct labor cost variance
Definition Definition Analysis of a difference between planned and actual behavior. After analyzing differences, companies find the reasons for variance so that the necessary steps should be taken to correct that variance.
Chapter 23, Problem 23.1TIATC
To determine
Concept Introduction:
Standard Costing System: Standard Costing system allows estimating the costs, preparing budgets for future periods, and analyzing the performance by comparing the budgets with actual results and find variances.
Variances Analysis: A Variance analysis is comparing the actual and standard figures and finding the differences or variances
Direct labor variances: Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:
1. Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows:
2. Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows:
3. Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows:
Or
Direct Labor cost variance = Actual Labor cost – Standard Labor Cost
Requirement-1:
To determine: The calculation of direct labor cost variance
To determine
Requirement -2:
To explain: Direct labor cost variance and its calculation
To determine
Requirement -3:
To explain: Direct labor efficiency variance and its calculation
To determine
Requirement -4:
To explain: Unfavorable Direct labor cost variance and the measures to control this variance
To determine
Requirement -5:
To explain: Unfavorable Direct labor efficiency variance and the measures to control this variance
Hadley, Inc. manufactures a product that uses $25 in direct materials and $10 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $13. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $30. What is the total manufacturing cost per unit for Hadley under the ABC system?
Please provide correct solution for this financial accounting question
Chapter 23 Solutions
Horngren's Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)
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