Case: Mercurial Company has made the following information available for its production facility for the current month. Fixed overhead was estimated at 22,000 machine hours for the production cycle. Actual machine hours for the period were 22,500; 4,200 units were produced. Material purchased (107,000 pieces) P529,650 Material quantity variance P7,000 U Machine hours used (22,500 hours) VOH spending variance P100 U Actual fixed overhead P81,000 Actual labor cost P60,300 Actual labor hours 8,500 Mercurial Company’s standard costs are as follows: Direct material 25 pieces @ P5 per piece Direct labor 2.0 hours @ P7 per hour Variable overhead (applied on a machine hour basis) 5.2 hours @ P3.00 per hour Fixed overhead (applied on a machine hour basis) 5.2 hours @ P3.50 per hour Determine the following items: e. labor rate variance f. standard hours allowed for labor g. total standard cost of labor allowed
Case: Mercurial Company has made the following information available for its production facility for the current month. Fixed overhead was estimated at 22,000 machine hours for the production cycle. Actual machine hours for the period were 22,500; 4,200 units were produced. Material purchased (107,000 pieces) P529,650 Material quantity variance P7,000 U Machine hours used (22,500 hours) VOH spending variance P100 U Actual fixed overhead P81,000 Actual labor cost P60,300 Actual labor hours 8,500 Mercurial Company’s standard costs are as follows: Direct material 25 pieces @ P5 per piece Direct labor 2.0 hours @ P7 per hour Variable overhead (applied on a machine hour basis) 5.2 hours @ P3.00 per hour Fixed overhead (applied on a machine hour basis) 5.2 hours @ P3.50 per hour Determine the following items: e. labor rate variance f. standard hours allowed for labor g. total standard cost of labor allowed
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 30P: Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following...
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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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Case:
Mercurial Company has made the following information available for its production facility for the current month. Fixed overhead was estimated at 22,000 machine hours for the production cycle. Actual machine hours for the period were 22,500; 4,200 units were produced.
Material purchased (107,000 pieces)
P529,650
Material quantity variance
P7,000
U
Machine hours used (22,500 hours)
VOH spending variance
P100
U
Actual fixed overhead
P81,000
Actual labor cost
P60,300
Actual labor hours
8,500
Mercurial Company’s standard costs are as follows:
Direct material
25 pieces @ P5 per piece
Direct labor
2.0 hours @ P7 per hour
Variable overhead
(applied on a machine hour basis)
5.2 hours @ P3.00 per hour
Fixed overhead
(applied on a machine hour basis)
5.2 hours @ P3.50 per hour
Determine the following items:
e. labor rate variance
f. standard hours allowed for labor
g. total standard cost of labor allowed
h. labor efficiency variance
i. actual variable overhead incurred
j. standard machine hours allowed
k. variable overhead efficiency variance
l. budgeted fixed overhead
m. applied fixed overhead
n. fixed overhead spending variance
o. volume variance
p. total overhead variance
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