Barbaro Production Company has developed the following standards for one of its products: STANDARD VARIABLE COST CARD One Unit of Product Materials: 30 square feet × $5 per square foot $150.00 Direct labor: 16 hours × $7 per hour 112.00 Variable manufacturing overhead: 16 direct labor hours × $5 per hour 80.00 Total standard variable cost per unit $342.00 The company records materials price variances at the time of purchase. The following activity occurred during the month of April: Materials purchased: 80,000 sq. feet at $5.30 per sq. foot Materials used: 74,000 square feet Units produced: 2,500 units Direct labor: 42,000 hours at $6.70 per hour Actual variable manufacturing overhead: $228,000 Required: d. Calculate the direct labor efficiency variance. e. Calculate the variable overhead spending variance. f. Calculate the variable overhead efficiency variance.
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.
Barbaro Production Company has developed the following standards for one of its products:
One Unit of Product
Materials: 30 square feet × $5 per square foot $150.00
Direct labor: 16 hours × $7 per hour 112.00
Variable manufacturing overhead: 16 direct labor hours × $5 per hour 80.00
Total standard variable cost per unit $342.00
The company records materials price variances at the time of purchase. The following activity occurred during the month of April:
Materials purchased: 80,000 sq. feet at $5.30 per sq. foot
Materials used: 74,000 square feet
Units produced: 2,500 units
Direct labor: 42,000 hours at $6.70 per hour
Actual variable manufacturing overhead: $228,000
Required:
d. Calculate the direct labor efficiency variance.
e. Calculate the variable overhead spending variance.
f. Calculate the variable overhead efficiency variance.
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