This Question: 15 pts 4 of 9 (5 completel This Test: 120 pts possa Al-Star, Inc

Question

This Question: 15 pts 4 of 9 (5 completel This Test: 120 pts possa Al-Star, Inc produced 1,000 units of the company's product in 2018. The standard quantty of direct materials was three yards of dioth per unt at a standand cost of $1 30 per yard. The accounting records showed that 2,800 mployees worked 1,500 houns and were paid $9 00 per hour yards of cloth were used and the company paid $1.35 per yard Standard time was two direct abor hours per unit at a standard rate ol $9 50 per dinect labor hour E Read the resirecnents Requirement 1. What are the benefits of seting cost standards? Standard costing heips managers do the following Requirement 2. Caloalate the direct material's cost variance and the direct materials efficiency varlance as wel as the diret labor cost and eiciency variances actual cost AQ-cal quantity, FOH- fxed overhead SC standard cost sastandand quanbty Direct materials cost variance Direct abor efioeney vanance of plant Assets

Explanation / Answer

1) Benefits of setting cost standards: Standard Costing helps managers do the following Standards are set after careful evaluation and hence can be considered as targets of Performance It can be used as a control measure by comparing actual cost with standard cost It help in control of costs by analysis of causes of variance. They help in Pricing 2) Direct material cost variance = Actual material cost-Standard material cost = (2800*1.35)-(1000*3*1.30)= $120 F Direct material price variance = (Actual price-Standard price)*Actual quantity = (1.35-1.30)*2800 = $140 UF Direct material quantity variance = (Actual quantity-Standard quantity)*Standard price = (2800-1000*3)*1.30 = $260 F Direct labor cost variance = Actual DL cost - Standard DL cost = 1500*9-1000*2*9.50 = $5500 F Direct labor rate variance = (Actual rate-Standard rate)*Actual hours = (9-9.50)*1500 = $750F Direct labor efficiency variance = (Actual hours-Standard hours)*Standard DL rate =(1500-1000*2)*9.5=$4750F

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