Concept explainers
1.
Concept Introduction:
Material overhead means difference between the budgeted material and in the actual material cost. There are 2 types of material variance, that is, material price variance and material quantity variance.
Direct labor cost variance is calculated by reducing the actual cost from the total budgeted cost of labor on product. Direct labor cost is 2 types which includes labor rate variance and labor quantity variance.
To Calculate:
a. Material price and quantity variance.
b. labor rate and efficiency variance.
2.
Concept Introduction:
Predetermined overhead is calculated by dividing the budgeted overhead from the standard labor hours or any other stated method. This rate is charged from customer.
Material overhead means difference between the budgeted material and in the actual material cost.
Direct labor cost variance is calculated by reducing the actual cost from the total budgeted cost of labor on product.
To Explain: Possible cause of above variances.
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EBK INTRODUCTION TO MANAGERIAL ACCOUNTI
- Calculation of materials and labor variances Fritz Corp. manufactures and sells a single product. The company uses a standard cost system. The standard cost per unit of product follows: The charges to the manufacturing department for November, when 5,000 units were produced, follow: The Purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 lb were purchased at a price of $2.90 per pound. Required: Calculate the following from standard costs for the data given, using the formulas on pages 421–422 and 424: Materials quantity variance. Materials purchase price variance (at time of purchase). Labor efficiency variance. Labor rate variance. Give some reasons as to why both the materials quantity variance and labor efficiency variance might be unfavorable.arrow_forwardDirect materials and direct labor variance analysis Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows: Instructions Determine (A) the standard cost per unit for direct materials and direct labor; (B) the price variance, quantity variance, and total direct materials cost variance; and (C) the rate variance, time variance, and total direct labor cost variance.arrow_forwardBotella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established: During December, 78,000 pounds of materials were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs: Required: 1. Compute the materials variances. 2. Compute the labor variances. 3. CONCEPTUAL CONNECTION What are the advantages and disadvantages that can result from the use of a standard costing system?arrow_forward
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