Materials and Labor Variances   The following actual and standard cost data for direct materials and direct labor relate to Hadley Company's production of 2,000 units of a product:                             Actual costs Standard costs         Direct materials 3,900 lb. @ $5.20 4,000 lb. @ $5.10         Direct labor 6,200 hr. @ $8.40 6,000 hr. @ $8.60                       Determine the following variances:                           a. Materials price                           b. Materials efficiency                           c. Labor rate                           d. Labor efficiency

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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.