Answered: Material and Labor VariancesThe…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Material and Labor Variances
The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product:

	Actual Costs		Standard Costs
Direct material		19,500	lbs. @	$5.30		20,000	lbs. @	$5.10
Direct labor		31,000	hrs. @	$8.40		30,000	hrs. @	$8.70

Determine the following variances:

Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.

Materials Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
a. Materials price	Answer	Answer
b. Materials efficiency	Answer	Answer

Labor Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
c. Labor rate	Answer	Answer
d. Labor efficieny	Answer	Answer

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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