Addis Labs, Inc., produces various chemical compaounds for iindustrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard coasts for one unit of Fludex, as follows: Standard Quantity or Hour Standard price or rate Standard cost Direct materials 2.5 ounces ETB 20.00 per ounces ETB 50.00 Direct labor 1.4 hours ETB 12.50 per ounces ETB 17.50 Variable manufacturing overhead 1.4 hours ETB 3.50 per ounces ETB 4.90 ETB 72.40 During November, the following activity was recorded by the company relative to production of Fludex: Materials purchased 12,000 ounces at a cost of ETB 225,000. There was no beginning inventory of materials; however, at the end of the month, 2,500 ounces of material remained in ending The company employs 35 lab technicians to work on the production of F During November, each worked an average of 160 hours at an average rate of ETB 12 per hour. Variable manufacturing overhead is assigned to Fludex on the basis of direct Jabor hours. Variable manufacturing overhead costs during November totaled ETB 18,200. During November, 3,750 good units of Fludex were The company's management is anxious to determine the efficiency of the Fludex production activities. Required: For direct materials used in the production of Fludex, compute the price and quantity For direct labor employed in the production of Fludex, compute the rate and efficiency Compute the variable overhead spending and efficiency
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.
Addis Labs, Inc., produces various chemical compaounds for iindustrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard coasts for one unit of Fludex, as follows:
|
|
Standard Quantity or Hour |
Standard price or rate |
|
|
Direct materials |
2.5 ounces |
ETB 20.00 per ounces |
ETB 50.00 |
|
Direct labor |
1.4 hours |
ETB 12.50 per ounces |
ETB 17.50 |
|
Variable manufacturing overhead |
1.4 hours |
ETB 3.50 per ounces |
ETB 4.90 |
|
|
|
|
ETB 72.40 |
During November, the following activity was recorded by the company relative to production of Fludex:
- Materials purchased 12,000 ounces at a cost of ETB 225,000.
- There was no beginning inventory of materials; however, at the end of the month, 2,500 ounces of material remained in ending
- The company employs 35 lab technicians to work on the production of F During November, each worked an average of 160 hours at an average rate of ETB 12 per hour.
- Variable manufacturing overhead is assigned to Fludex on the basis of direct Jabor hours. Variable
manufacturing overhead costs during November totaled ETB 18,200. - During November, 3,750 good units of Fludex were
The company's management is anxious to determine the efficiency of the Fludex production activities.
Required:
- For direct materials used in the production of Fludex, compute the price and quantity
- For direct labor employed in the production of Fludex, compute the rate and efficiency
- Compute the variable overhead spending and efficiency
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