Rancho Cucamonga Inc. established the following direct materials and direct labor standards for its product. Item Price Quantity Total Direct materials $2 3 lbs $6 Direct labor $6 2 hrs $12 The firm expected to make, and made, ten (10) units of finished goods inventory. Use the table above to complete the following direct labor variance tables and to answer questions Complete the following direct labor variance table. The left columns report the actual cost data.
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.
Rancho Cucamonga Inc. established the following direct materials and direct labor standards for its product.
|
Item |
Price |
Quantity |
Total |
|
Direct materials |
$2 |
3 lbs |
$6 |
|
Direct labor |
$6 |
2 hrs |
$12 |
The firm expected to make, and made, ten (10) units of finished goods inventory. Use the table above to complete the following direct labor variance tables and to answer questions
Complete the following direct labor variance table. The left columns report the actual cost data.
Direct Labor Variances
|
Actual Price x Actual Quantity |
Standard Price x Actual Quantity |
|
$5hr x (3hrs x 10 units) = $150
|
$_ x (_ x _ ) = $_ |
Complete the following direct labor variance table. The left columns report the actual cost data.
Direct Labor Variances
|
Actual Price x Actual Quantity |
Standard Price x Standard Quantity |
|
$5hr x (3hrs x 10 units) = $150
|
$_ x (_ x _ ) = $_ |
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