Concept introduction:
Variances are generally the deviations of actual reports with the budget made for the business. This is determined by comparing the actual one with the budgeted goals so as to know the deviation and then the managers can take the actions which are better for eliminating the variances.
To find out:
The missing figures of the variances.
Answer to Problem 1E
Direct material price variance
Direct material quantity variance
Direct material spending variance
Direct labor rate variance
Direct labor efficiency variance
Direct labor spending variance
Explanation of Solution
Material Variances:
As per given the data:
Particular | Standard | Actual |
Standard amount per can produced | ||
Actual number of pans produced | ||
Standard quantity | ||
Price |
Calculation of material price variance:
It is the difference between actual and standard price of product, and formula is
It is favorable variance. So, it is indicating that the company has paid lower price from the standard price.
Calculation of material quantity variance:
It is the nominal value difference between actual and standard quantity, and formula is
It is also favorable variance. So, it is indicating that the company has used less quantity of raw material than the standard quantity.
Calculation of direct material spending variance:
It is the total of material price variance and material quantity variance, and formula is
Labor variances:
As per given the data:
Particular | Standard | Actual |
Standard hours per can produced | ||
Actual number of pans produced | ||
Total hours | ||
Rate |
Calculation of direct labor rate variance:
It is the comparison between standard hour late and actual hour rate with constant actual hours, and formula is:
It is favorable. So, it is indicating that the actual hourly rate is lower from standard hourly rate.
Calculation of direct labor efficiency variance:
It is the comparison between the actual labor hours and standard labor hours with the standard hour rate, and formula is:
It is unfavorable that means employees used more hours to produce pens.
Calculation of direct labor spending variance:
It is the total of labor rate variance and labor efficiency variance, and formula is
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Chapter 9 Solutions
Managerial Accounting
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- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub