Marj Co. uses a standard cost system and has the following standard variable costs. Direct Materials P6.00 per meter Direct Labor ? Variable Factory Overhead P3.00 per direct labor hour Factory overhead is applied to production based on direct labor hours. During the month of February, 5,000 units were produced and sold to customers. The following are the selected production data for the month: Materials Used Direct Labor Variable FOH Standard Cost Allowed $84,000 $52,500 $21,000 Actual Cost Incurred $75,000 ? $18,000 Materials Quantity Variance $6,000 U Actual Direct Labor Hours 7,500 hours Standard FOH rate per direct labor hour 3.00/hr. Standard Price per Meter 6.00 per meter The difference between the standard and actual cost per unit produced is P0.15 favorable. Requirements: 1. Standard direct labor rate per hour 2. Labor Rate Variance 3. Labor 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.
Marj Co. uses a
Direct Materials P6.00 per meter
Direct Labor ?
Variable Factory
Factory overhead is applied to production based on direct labor hours. During the month of February, 5,000 units were produced and sold to customers. The following are the selected production data for the month:
|
Materials Used |
Direct Labor | Variable FOH | |
|
Standard Cost Allowed |
$84,000 | $52,500 | $21,000 |
| Actual Cost Incurred | $75,000 | ? | $18,000 |
| Materials Quantity Variance | $6,000 U | ||
| Actual Direct Labor Hours | 7,500 hours | ||
| Standard FOH rate per direct labor hour | 3.00/hr. | ||
| Standard Price per Meter | 6.00 per meter |
The difference between the standard and actual cost per unit produced is P0.15 favorable.
Requirements:
1. Standard direct labor rate per hour
2. Labor Rate Variance
3. Labor Efficiency Variance
Step by step
Solved in 4 steps
