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What are the two variances between the actual cost and the standard cost for direct labor?
The two variances between the actual cost and the standard cost for direct labor are the labor rate variance and the labor efficiency variance. The labor rate variance measures the difference between the actual hourly wage paid and the standard wage expected, multiplied by the actual hours worked. The labor efficiency variance assesses the difference between the actual hours worked and the standard hours allowed for the actual production, valued at the standard hourly rate. These variances help businesses analyze their labor costs and operational efficiency.
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What are the uses of a direct labor budget?
Direct labor budget utilized to compare the actual direct labor cost and standard cost for specific task and for controlling purpose so that if there are variances those variances could be eliminated to bring the actual cost to budgeted cost.
What effect would you expect poor-quality materials to have on direct labor variances?
Poor-quality materials are likely to increase direct labor variances negatively. Workers may spend more time addressing defects, reworking, or adjusting processes to accommodate subpar materials, leading to higher labor costs and inefficiencies. This can result in unfavorable labor efficiency variances, as actual labor hours may exceed standard expectations due to the complications arising from using low-quality inputs.
What is the Direct labor efficiency variance formula?
(actual time * standard rate) - (standard time * standard rate)
Will the direct labor price variance always be unfavorable if more hours are worked than the standard hours allowed for the actual output attained?
No, Direct labor price variance is created due to difference in standard labor rate and actual labor rate for example standard labor rate per unit is 10 and actual labor rate is 11 then 1 per unit is unfavourable direct labor price variance.
What are Possible reasons for the unfavourable efficiency variances in the period Direct material efficiency variance?
Changes in quality of inputs from manufacturer.
What are the uses of a direct labor budget?
Direct labor budget utilized to compare the actual direct labor cost and standard cost for specific task and for controlling purpose so that if there are variances those variances could be eliminated to bring the actual cost to budgeted cost.
Importance of standard costing?
A valuable management tool, standard costing is part of cost accounting. Rather than using actual costs for direct material, labor and manufacturing overhead, standard costs are used to easily track variances and estimate profit.Though actual costs are still paid, standard costing is often used for inventories and cost of goods sold. The difference between standard and actual costs are known as variances. These variances are what make standard costing such a valuable practice for management. Management can quickly become aware of changes in budgeted costs by tracking the variances.When standard costing is used, you will often hear the terms unfavorable or favorable variance. This refers to changes in actual costs in relation to planned or standard costs. A favorable variance takes place when actual costs dip below standard costs. Conversely, if actual costs rise above standards, the variance is unfavorable.In regards to manufacturing companies, standard costs would first be seen as individual parts or pieces of the finished product. This means that the final standard cost will be the sum of the standard costs of each of the individual pieces of the product.
what is Direct material variance?
Direct material variance refers to the difference between the actual cost of direct materials used in production and the standard cost that was expected to be incurred. It is typically divided into two components: the price variance, which measures the difference between the actual price paid for materials and the standard price, and the quantity variance, which assesses the difference between the actual quantity of materials used and the standard quantity expected for the actual level of production. Analyzing this variance helps businesses identify inefficiencies and cost management issues in their production processes.
What is the Direct labor efficiency variance formula?
(actual time * standard rate) - (standard time * standard rate)
Will the direct labor price variance always be unfavorable if more hours are worked than the standard hours allowed for the actual output attained?
No, Direct labor price variance is created due to difference in standard labor rate and actual labor rate for example standard labor rate per unit is 10 and actual labor rate is 11 then 1 per unit is unfavourable direct labor price variance.
Why are variances generally segregated in terms of a price variance and an efficiency variance?
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
Which of the following activities fall within the Cost Management business process area?
Establishes cost targets and efficiency goals; Accumulates all direct and indirect costs incurred to accomplish an objective; Calculates and analyzes variances from plan to actual.
Why are the standard direct labor and direct materials cost based on actual case production volume rather than planned cases production?
Because they think they will get more money
What are Possible reasons for the unfavourable efficiency variances in the period Direct material efficiency variance?
Changes in quality of inputs from manufacturer.
Which department is often responsible for the direct materials price variance?
Receiving can affect direct materials price variances if there is no inventory. The accounting department will mark up prices to reflect a shortage.
What type of variance is excess usage?
Since actual usage of the direct material was greater than the standard allowed, the excess usage is called an unfavorable variance
What is the definition of direct map scales?
A direct map scale is defined as being a chart used to show the ratio between the distance shown on the map and the actual corresponding distance that is found on Earth. A direct scale is often represented by a scaled down size of one and eighty-thousandth of the actual size.
