Standards: 3 yards of cloth per unit at $1.05 per yard 2 direct labor hours per unit at $10.50 per hour Overhead allocated at $5.00 per direct labor hour Actual: 2,600 yards of cloth were purchased at $1.10 per yard Employees worked 1,800 hours and were paid $10.00 per hour Actual variable overhead was $1,700 Actual fixed overhead was $7,300 Direct materials cost variance $ 130 U Direct materials efficiency variance 420 F Direct labor cost variance 900 F Direct labor efficiency variance 2,100 F Variable overhead cost variance 1,500 U Variable overhead efficiency variance 1,500 F Fixed overhead cost variance 600 U Fixed overhead volume variance 1,600 F
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.
Preparing journal entries
Marsh Company uses a
Marsh Company reported the following variances:
Marsh produced 1,000 units of finished product in 2018. Record the journal entries to record direct materials, direct labor, variable
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