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# Variance analysis.

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The following direct labor standards have been established for product N30A:

Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances.

Eastern Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours (DLHs). The denominator activity level is 60,000 direct labor-hours, or 300,000 units.

Required:

a. Compute the variable manufacturing overhead spending and efficiency variances.
b. Compute the fixed manufacturing overhead budget and volume variances.

#### Solution Summary

Excel file shows calculations of labor rate variance , labor efficiency variance, journal entry to record direct labor costs during the month, including the direct labor variances,variable manufacturing overhead spending and efficiency variances and fixed manufacturing overhead budget and volume variances.

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## ANOVA Problem

When we want to test two samples to determine if it is likely that the population means (estimated by the sample means) are different, we typically use a t-test. If the samples are large, we can also use a z-test. (Note that the formulas for computing s, t and/or z in the case of a two-sample test are different than the formulas for computing the same values in a one-sample test. Use Excel data analysis to conduct tests comparing two sample means.)

Using ANOVA (short for Analysis of Variance), however, we can test 3 or more sample means to determine if at least one of the sample means comes from a population with a mean that is significantly different from all of the others in the test. We actually do this by estimating a combined population variance two different ways and comparing the two estimates (the ratio of these two variance estimates follows the so-called "F distribution").

Question:

Why do we need a new test method to compare the means of 3 or more populations? Why can't we just use a series of z-tests or t-tests to compare all of the possible pairs of population means to see if one (or more) is different?

Most of the testing is to determine one or two things:

1. Is there a statistically significant difference between two or more population means? (based on comparison of 2 or more sample means)

2. Is there a statistically significant relationship between two or more variables? We can use regression analysis or chi-square tests to answer this second question.)

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