A manufactured product has the following information for June. Standard Quantity and Cost Actual Results Direct materials 6 pounds @ $8 per pound 45,500 pounds @ $8.20 per pound Direct labor 2 DLH @ $15 per DLH 14,600 hours @ $15.60 per hour Overhead 2 DLH @ $12 per DLH $ 186,100 Units manufactured 7,500 units Compute the (1) direct labor rate variance and (2) direct labor efficiency variance. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance. Round "Rate per hour" answers to 2 decimal places.) AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate
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.
A manufactured product has the following information for June.
| Standard Quantity and Cost | Actual Results | ||
|---|---|---|---|
| Direct materials | 6 pounds @ $8 per pound | 45,500 | pounds @ $8.20 per pound |
| Direct labor | 2 DLH @ $15 per DLH | 14,600 | hours @ $15.60 per hour |
| 2 DLH @ $12 per DLH | $ 186,100 | ||
| Units manufactured | 7,500 | units |
Compute the (1) direct labor rate variance and (2) direct labor efficiency variance. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance. Round "Rate per hour" answers to 2 decimal places.)
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
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