For the stamping department of a manufacturing firm, the standard cost for direct labor is $15 per hour, and the production standard calls for 1,000 stampings per hour. During February, 198 hours were required for actual production of 186,000 stampings. Actual direct labor cost for the stamping department for June was $3,168. Required: Complete the following performance report for February: Calculate the direct labor efficiency and rate variances for February. Reporting the efficiency and rate variances to the appropriate managers could improve control over the stamping department's direct labor.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
For the stamping department of a manufacturing firm, the
Required:
- Complete the following performance report for February:
- Calculate the direct labor efficiency and rate variances for February.
- Reporting the efficiency and rate variances to the appropriate managers could improve control over the stamping department's direct labor.
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