Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Hours 18 minutes (0.30 hours) During July, 7,150 hours of direct labour time were recorded to make 23,000 units. The direct labour cost totalled $91,520 for the month. Direct labour cost Required: 1-a. What direct labour cost should have been incurred to make the 23,000 speakers? (Do not round intermediate calculations.) Standard Rate per Hour $12.00 Total variance $ Standard Cost $3.60 Labour rate variance Labour efficiency variance 79,200 1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 2. Break down the difference in cost from requirement 1-b above into a labour rate variance and a labour efficiency variance. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Hours 18 minutes (0.30 hours) During July, 7,150 hours of direct labour time were recorded to make 23,000 units. The direct labour cost totalled $91,520 for the month. Direct labour cost Required: 1-a. What direct labour cost should have been incurred to make the 23,000 speakers? (Do not round intermediate calculations.) Standard Rate per Hour $12.00 Total variance $ Standard Cost $3.60 Labour rate variance Labour efficiency variance 79,200 1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 2. Break down the difference in cost from requirement 1-b above into a labour rate variance and a labour efficiency variance. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 10E: Ada Clothes Company produced 40,000 units during April. The Cutting Department used 12,800 direct...
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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.
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