Motopads Manufacturing, Inc. manufactures a single product. Variable manufacturing overhead is applied to products based on direct labor hours. The standard costs for each unit of product are as follows: Direct material: 6 grams at P5 per gram P30.00 Direct labor: 1.8 hours at P100 per hour 180.00 Variable manufacturing overhead: 1.8 hours at P50 per hour 90.00 Total standard variable cost per unit P300.00 During August, the company produced 2,000 units, with costs broken down as follows: Material purchased: 18,000 grams at 6 per gram P108,000.00 Material used in production: 14,000 grams - Direct labor: 4,000 hours at P97.50 per hour 390,000.00 Variable manufacturing overhead costs incurred 208,000.00 Requirement: Compute and show solutions for the: Direct materials variance Direct labor variance Variable manufacturing overhead variances
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.
Motopads Manufacturing, Inc. manufactures a single product. Variable manufacturing
|
Direct material: 6 grams at P5 per gram |
P30.00 |
|
Direct labor: 1.8 hours at P100 per hour |
180.00 |
|
Variable manufacturing overhead: 1.8 hours at P50 per hour |
90.00 |
|
Total standard variable cost per unit |
P300.00 |
During August, the company produced 2,000 units, with costs broken down as follows:
|
Material purchased: 18,000 grams at 6 per gram |
P108,000.00 |
|
Material used in production: 14,000 grams |
- |
|
Direct labor: 4,000 hours at P97.50 per hour |
390,000.00 |
|
Variable |
208,000.00 |
Requirement:
- Compute and show solutions for the:
- Direct materials variance
- Direct labor variance
- Variable manufacturing overhead variances
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