Chapter 26, Problem 7E

To determine

Variances: The variances are used to calculate the find the variation in actual cost by comparing it to the standard cost. Variances normally find the difference in between cost that is actually incurred and cost which was estimated by the business.

Direct Material Variance: The variance which is used to determine the variation in the standard direct material and actual direct material is called direct material variance. It is the sum of material price variance and material quantity variance.

Material Price Variance: The variation in between actual price and estimated price paid for materials is called material price variance. It is used to determine difference in price paid for material the price that was supposed to be paid for material.

Material Quantity Variance: The variance which is used to compare the in the actual quantity of materials utilized in production with estimated quantity of materials material that is supposed to be used in production and helps to find variation is called material quantity variance.

Total Labor Variance: The variance which is used to find the variation in the actually incurred direct labor cost and the estimated cost of the direct labor. It is the sum of labor price variance and the labor quantity variance.

Labor Price Variance: The difference of the rate paid to workers and rate that was supposed to be paid to the worker is called labor price variance.

Labor Quantity Variance: The variance which is used to find the variation in the actual hours worked by labor to manufacture product and estimated hours that is required to manufacture a product is called labor quantity variance.

To determine: Total, price, quantity variances for materials and labor.