d of material: $8.25 per lb. o Standard cost per direct labor hour: $7.50 per hour o Actual direct labor hours: 5,500 hours o Labor efficiency variance: $1,650 unfavorable o Standard number of direct labor hour per unit of
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.
Ozark Adventures, LLC, a manufacturer of the sleeping bags uses
o Actual cost of direct material purchased and used: $87,807.50
o Material price variance: $5,665 favorable
o Total materials variance: $220 favorable
o Standard cost per pound of material: $8.25 per lb.
o Standard cost per direct labor hour: $7.50 per hour
o Actual direct labor hours: 5,500 hours
o Labor efficiency variance: $1,650 unfavorable
o Standard number of direct labor hour per unit of product: 2.40 hours/unit
o Total labor variance: $5,775 unfavorable
Calculate the actual material cost per pound.
Important: Present your number without units and round to two decimal places. For example if the answer is $11.25 per pound, simply record 11.25.
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