he budget for the month of May was for 15,600 units at a direct materials cost of $30 per unit. Direct labor was budgeted at 39 minutes per unit for a total of $140,400. Actual output for the month was 10,000 units with $165,000 in direct materials and $92,775 in direct labor expense. The direct labor standard of 39 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a(n): unfavorable direct labor price (rate) variance of $2,775 favorable materials efficiency (quantity) variance of $9,000. unfavorable direct labor efficiency variance of $2,775 favorable direct labor efficiency variance of $2,775
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.
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he budget for the month of May was for 15,600 units at a direct materials cost of $30 per unit. Direct labor was budgeted at 39 minutes per unit for a total of $140,400. Actual output for the month was 10,000 units with $165,000 in direct materials and $92,775 in direct labor expense. The direct labor standard of 39 minutes was obtained throughout the month. |
| unfavorable direct labor price (rate) variance of $2,775 | |
| favorable materials efficiency (quantity) variance of $9,000. | |
| unfavorable direct labor efficiency variance of $2,775 | |
| favorable direct labor efficiency variance of $2,775 |
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