Variance analysis
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Co provides the following standard cost data:
Direct material (3 gallons at $5 per gallon) $15.00
Direct Labor (2 hours at $12 per hour) $24.00
During the period, the company produced and sold 26,000 units, incurring the following costs:
Direct material (75,000 gallons at $4.90 per gallon
Direct Labor (47,500 hours at $12.05 per hour
The materials usage variance was:
a) $15,000 favorable b)$15,000 unfavorable c)$14,700 favorable d) $14,700 unfavorable
Please also explain how one would get labor usage variance.
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Solution Summary
Material usage variance and labor usage variance are calculated.
Solution Preview
Standard quantity required for actual production = 26000 units * 3 gallons per unit = 78000 gallons
Material usage variance = Standard cost per gallon* (actual quantity - ...
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