Variance analysis
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The budget for May called for production of 9,000 units. Actual output for the month was 8,500 units with total direct materials cost of $127,500 and total direct labor cost of $77,775. The direct labor standards call for 45 minutes of direct labor per unit at a cost of $12 per direct labor-hour. The direct materials standards call for one pound of direct materials per unit at a cost of $15 per pound. The actual direct labor-hours were 6,375. Variance analysis of the performance for the month of May would indicate:
$7,500 favorable materials quantity variance
$1,275 favorable direct labor efficiency variance
$1,275 unfavorable direct labor efficiency variance
$1,275 unfavorable direct labor rate variance
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Solution Summary
This provides an example of determining what would be indicated by variance analysis. Step by step calculations are provided.
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Problem: The budget for May called for production of 9,000 units. Actual output for the month was 8,500 units with total direct materials cost of $127,500 and total direct labor cost of ...
Purchase this Solution
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