Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month: Standard Cost Information Direct materials .... Quantity allowed per unit Direct labor rate... Hours allowed per unit ... Fixed overhead budgeted . Normal level of production Variable overhead application rate .. Fixed overhead application rate ($12,000 _ 1,200 units). . . 10.00 per unit Total overhead application rate. . . $5 per pound .100 pounds per unit . $20.00 per hour . 2 hours per unit $12,000 per month 1,200 units $ 2.00 per unit $12.00 per unit Actual Cost Information Cost of materials purchased and used.... Pounds of materials purchased and used . Cost of direct labor ... Hours of direct labor .. Cost of variable overhead . . Cost of fixed overhead . Volume of production . *e $468,000 .104,000 pounds $46,480 2,240 hours arre$2,352 $12,850 ..1,000 units Instructions 1. Compute the labor rate variance, given an actual labor rate of $20.75 per hour ($46,480 + 2,240 hours). 2. Compute the labor efficiency variance.
Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month: Standard Cost Information Direct materials .... Quantity allowed per unit Direct labor rate... Hours allowed per unit ... Fixed overhead budgeted . Normal level of production Variable overhead application rate .. Fixed overhead application rate ($12,000 _ 1,200 units). . . 10.00 per unit Total overhead application rate. . . $5 per pound .100 pounds per unit . $20.00 per hour . 2 hours per unit $12,000 per month 1,200 units $ 2.00 per unit $12.00 per unit Actual Cost Information Cost of materials purchased and used.... Pounds of materials purchased and used . Cost of direct labor ... Hours of direct labor .. Cost of variable overhead . . Cost of fixed overhead . Volume of production . *e $468,000 .104,000 pounds $46,480 2,240 hours arre$2,352 $12,850 ..1,000 units Instructions 1. Compute the labor rate variance, given an actual labor rate of $20.75 per hour ($46,480 + 2,240 hours). 2. Compute the labor efficiency variance.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead
Section: Chapter Questions
Problem 13E: Using variance analysis and interpretation Last year, Wrigley Corp. adopted a standard cost system....
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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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