Ironwood Company manufactures cast-iron barbeque cookware. During a recent windstorm, it lost some of its cost accounting records. Ironwood has managed to reconstruct portions of its standard cost system database but is still missing a few pieces o information. Required: Use the information in the table to determine the unknown amounts. You may assume that Ironwood does not keep any raw materials on hand. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., variance). Direct Materials Direct Labor Standard amount per pan produced 2.5 pound 1.10 hour Standard price $ 4.20 per pound $ 16.00 per hour Actual amount used per pan produced 2.4 pound 1.20 hour Actual price $ 4.10 per pound $ 15.50 per hour Actual number of pans produced and sold 2,500 pans 2,500 pans Direct materials price variance Direct materials quantity variance Direct materials spending variance Direct labor rate variance Direct labor efficiency variance Direct labor spending variance
Ironwood Company manufactures cast-iron barbeque cookware. During a recent windstorm, it lost some of its cost accounting records. Ironwood has managed to reconstruct portions of its standard cost system database but is still missing a few pieces o information. Required: Use the information in the table to determine the unknown amounts. You may assume that Ironwood does not keep any raw materials on hand. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., variance). Direct Materials Direct Labor Standard amount per pan produced 2.5 pound 1.10 hour Standard price $ 4.20 per pound $ 16.00 per hour Actual amount used per pan produced 2.4 pound 1.20 hour Actual price $ 4.10 per pound $ 15.50 per hour Actual number of pans produced and sold 2,500 pans 2,500 pans Direct materials price variance Direct materials quantity variance Direct materials spending variance Direct labor rate variance Direct labor efficiency variance Direct labor spending variance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Step 1: Introduction to variance analysis
VIEWStep 2: Computation of Direct materials price variance
VIEWStep 3: Computation of Direct materials quantity variance
VIEWStep 4: Computation of Direct materials spending variance
VIEWStep 5: Computation of Direct labor rate variance
VIEWStep 6: Computation of Direct labor efficiency variance
VIEWStep 7: Computation of Direct labor spending variance
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