Montecino Corporation uses two different types of labor to manufacture its product. The types of labor, Cutting and Setup, have the following standards: Labor Type Standard Mix Standard Unit Price Standard Cost Cutting 500 hours $7.50 per unit $3,750 Setup 125 hours 5.00 per unit $ 625 Yield 3,125 units During July, the following actual production information was provided: Labor Type Actual Mix Cutting 4,375 hours Setup 1,875 hours Yield 28,125 units What is the Labor mix variance? a.$3,750(U) b.$3,750(F) c.$1,563(F) d.$1,563(U)
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.
Montecino Corporation uses two different types of labor to manufacture its product. The types of labor, Cutting and Setup, have the following standards:
| Labor Type | Standard Mix | Standard Unit Price | ||||
| Cutting | 500 hours | $7.50 per unit | $3,750 | |||
| Setup | 125 hours | 5.00 per unit | $ 625 | |||
| Yield | 3,125 units |
During July, the following actual production information was provided:
| Labor Type | Actual Mix | |
| Cutting | 4,375 hours | |
| Setup | 1,875 hours | |
| Yield | 28,125 units |
What is the Labor mix variance?
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