Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor: Direct Material: Quantity, 0.28 hour Quantity, 7 kilograms Rate, $14.00 per hour Price, $0.66 per kilogram Actual material purchases amounted to 340,400 kilograms at $0.690 per kilogram. Actual costs incurred in the production of 46,000 units were as follows: Direct labor: $197,340 for 13,800 hours Direct material: $225,354 for 326,600 kilograms
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.
Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.
| Direct Labor: | Direct Material: |
| Quantity, 0.28 hour | Quantity, 7 kilograms |
| Rate, $14.00 per hour | Price, $0.66 per kilogram |
Actual material purchases amounted to 340,400 kilograms at $0.690 per kilogram. Actual costs incurred in the production of 46,000 units were as follows:
| Direct labor: | $197,340 for 13,800 hours |
| Direct material: | $225,354 for 326,600 kilograms |
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