Variance analysis demonstration problem Joe Smith, the production supervisor, was happy to see the report below. He stated, "This $.76 excess cost per unit is well within the 3 percent range management has set for acceptable variances. We have nothing to worry about." Actual production for the month was 4,000 units. Overhead is assigned to products using direct labor-hours. For the month ended June 30, 20XX Standard Actual Direct materials: usage rate Cost-unit Cost-unit Standard: feet 3.5 $1.46 $5.11 Actual: feet 3.4 $1.50 $5.10 Direct Labor: Standard: hours 2 $9.00 18.00 Actual: hours 2.1 $8.90 18.69 Variable overhead: Standard: hours 2 $1.85 3.70 Actual: hours 2.1 $1.80 3.78 $26.81 $27.57 Explanation Excess of actual cost over standard cost 0.76 26.81-27.57 Percentage variance 2.83% .76/26.81 Actual units produced 4,000 units Required: Identify if the variances are favorable or unfavorable. Total variance #1 Per unit #2 a. Materials price and usage variances Price variance
This is the end of the preview. Sign up
access the rest of the document.
This note was uploaded on 11/13/2011 for the course MBA 642 taught by Professor Jamesstephens during the Summer '11 term at Bellevue.