4. Break down the total budget variance for direct labor into a rate variance and an efficiency variance. Labor Rate Variance Labor Efficiency Variance Feedback Prepare the journal entries associated with these variances. If an amount box does not require an entry, leave it blank or enter "0".
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.
Standard Costs, Decomposition of
Haversham Corporation produces dress shirts. The company uses a
| Fabric (1.5 yds. @ $2.80) | $4.20 |
| Direct labor (1.1 hr. @ $20) | 22.00 |
| Total prime cost | $26.20 |
During the year, Haversham produced 9,500 shirts. The actual fabric purchased was 14,150 yards at $2.74 per yard. There were no beginning or ending inventories of fabric. Actual direct labor was 10,570 hours at $19.60 per hour.
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