Cost Accounting-Problem 2: Direct Cost Variance Analysis

Cost Accounting-Problem 2: Direct Cost Variance Analysis

Cost Accounting-Problem 2: Direct Cost Variance Analysis

Problem 2: Direct Cost Variance Analysis (30 points total)Ken Co. uses standard costing for accounting. Following is the standards for production of its only product:Direct material: 18 pounds at $25 per poundDirect labor: 6 hours at $18 per hour.During March company records showed the following:Material purchased: 16,000 pounds at a cost of 352,000Material used: 15,000 poundsDirect labor hours: 4,700 hrs at a cost of $21.00 per hrsUnits produced: 800 unitsCompute the direct labor efficiency and price variances. (10 points)Compute the direct material efficiency and price variances. (10 points)Explain how a favorable direct material price variance may be related to an unfavorable direct material efficiency variance. (10 points)

 

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