Standard and the actual costs for direct materials and direct labor are given as under: Standard costs Direct materials 8,000 units at total direct material costs Rs. 40,000 Direct labor: 7,000 hours at Rs. 6 per hour Actual costs Direct materials 8,500 units at Rs. 4.5 per unit Direct labor: 6,500 hours at Rs. 6.25 per hour Required a. Material Price Variance and Material Quantity Variance b. Labor Rate Variance and Labor Efficiency Variance c. Entries in general journal to record the above information
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.
Standard and the actual costs for direct materials and direct labor are given as under:
Direct materials 8,000 units at total direct material costs Rs. 40,000
Direct labor: 7,000 hours at Rs. 6 per hour Actual costs
Direct materials 8,500 units at Rs. 4.5 per unit
Direct labor: 6,500 hours at Rs. 6.25 per hour
Required
a. Material Price Variance and Material Quantity Variance
b. Labor Rate Variance and Labor Efficiency Variance
c. Entries in general journal to record the above information
d. What do you realize whether the overall variation is in favorable or unfavorable?
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