Mr. Chan purchased 60,000 lbs. of chemical X for P210,000. During May 2020, Mr. Chan, manufactured 10,000 units of the product. The following information is available for the month of May: Direct materials: Standard for a unit: 5.8 gallons @ P3 per gallon Actual: 57,000 gallons Direct Labor: Standard for a unit: 30 min. @ P9 per DLH Actual: 4,800 DLHS @ P9.10 per DLH Compute the labor rate and 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.
Mr. Chan purchased 60,000 lbs. of chemical X for P210,000. During May 2020, Mr. Chan, manufactured 10,000 units of the product. The following information is available for the month of May:
Direct materials:
Standard for a unit: 5.8 gallons @ P3 per gallon
Actual: 57,000 gallons
Direct Labor:
Standard for a unit: 30 min. @ P9 per DLH
Actual: 4,800 DLHS @ P9.10 per DLH
Compute the labor rate and efficiency variance.
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