ompany produces a single product. The standard costs for one unit of product are as follows: Direct material: 6 kilograms at Php0.50 per kilogram = Php3 Direct labor: 1.8 hours at Php10 per hour = Php18 Variable manufacturing overhead: 1.8 hours at Php5 per hour 9 Total standard variable cost per unit Php30 Note: Variable manufacturing overhead is applied to products on the basis of direct labor-hours. 2,000 units were produced in June with the following costs: Material purchased: 18,000 kilograms at Php0.60 per kilogram = Php10,800 Material used in production: 14,000 kilograms
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.
Company produces a single product. The
Direct material: 6 kilograms at Php0.50 per kilogram = Php3
Direct labor: 1.8 hours at Php10 per hour = Php18
Variable manufacturing
Total standard variable cost per unit Php30
Note: Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
2,000 units were produced in June with the following costs:
Material purchased: 18,000 kilograms at Php0.60 per kilogram = Php10,800
Material used in production: 14,000 kilograms
Direct labor: 4,000 hours at Php9.75 per hour = Php39,000
Variable
Direct material: 6 kilograms at Php0.50 per kilogram Php3
Direct labor: 1.8 hours at Php10 per hour 18
Variable manufacturing overhead: 1.8 hours at Php5 per hour 9
Total standard variable cost per unit Php30
Required: Compute the following:
- direct materials
- direct labor
- variable manufacturing overhead variances
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