Chapter 8, Problem 12E

Using variance analysis and interpretation

Last year, Endicott Corp. adopted a standard cost system. Labor standards were set on the basis of time studies and prevailing wage rates. Materials standards were determined from materials specifications and the prices then in effect.

On June 30, the end of the current fiscal year, a partial trial balance revealed the following:

Standards set at the beginning of the year have remained unchanged. All inventories are priced at standard cost. What conclusions can be drawn from each of the four variances shown in Endicott’s trial balance?