Part of your company’s accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "per unit" answer values to 2 decimal places.) Direct Labor Direct Material Standard price or rate price per unit of input ? per unit $7.00 per lb Standard Quantity per unit of output ? hours per unit 6.40 lbs per unit Actual quantity used per unit of output $1.80 hours 6.80 lbs per unit Actual price or rate per unit $11 per hour $6.00 per lb Actual Output 5,000 units 5,000 units Direct-material price variance $34,000 F Direct-material quantity variance $14,000 U Total direct-material variance $20,000 F Direct-labor rate variance $9,000 U Direct-labor efficiency variance $10,000 F Total direct-labor variance $1,000 F
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.
Part of your company’s accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "per unit" answer values to 2 decimal places.)
| Direct Labor | Direct Material | |||
| Standard price or rate price per unit of input | ? | per unit | $7.00 | per lb |
| Standard Quantity per unit of output | ? | hours per unit | 6.40 | lbs per unit |
| Actual quantity used per unit of output | $1.80 | hours | 6.80 | lbs per unit |
| Actual price or rate per unit | $11 | per hour | $6.00 | per lb |
| Actual Output | 5,000 | units | 5,000 | units |
| Direct-material price variance | $34,000 | F | ||
| Direct-material quantity variance | $14,000 | U | ||
| Total direct-material variance | $20,000 | F | ||
| Direct-labor rate variance | $9,000 | U | ||
| Direct-labor efficiency variance | $10,000 | F | ||
| Total direct-labor variance | $1,000 | F |
The variance is the difference between standard output and actual output of the production.
Direct labor rate variance = (SR -AR) * AH
Direct labor efficiency variance = (SH - AH) * SR
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