Match each term to the correct definition.
b. Efficiency variance
c. Cost variance
1. Measures whether the quantity of materials or laborused to make the actual number of outputs is within thestandard allowed for the number of outputs.
2. Uses standards based on best practice.
3. Measures how well the business keeps unit costs ofmaterials and labor inputs within standards.
4. A price, cost, or quantity that is expected under normalconditions.
Uses standards based on best practice.
Measures whether the quantity of materials or labor used to make the actual number of outputs is within the standard allowed for the number of outputs.
Measures how well the business keeps unit costs of materials and labor inputs within standards.
A price, cost, or quantity that is expected under normal conditions.
Benchmarking is a process of comparing the performance of an organisation to a predetermined goal or number how the organisation's productivity, efficiency, and competitiveness measures up to industry standards.
Efficiency variance is the distinction between the actual unit utilization and the expected amount. The expected amount is generally the standard quantity of direct labor, machine usage time,direct materials, and etc that is assigned to a product.
Cost variance is the distinction between the expense actually incurred and the budgeted amount of expense that ought have been incurred.
Standard costing is the estimated price of a product or service and act of substituting an expected expense for the actual expense of an operation or product.
Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.com/Horngren. Pilchuck Company manufactures tote bags and has provided the following information for September 2018:
00Question: Mason Fender is a competitor of Matthews Fender from Exercise E2319. Mason Fender also uses a standard cost system and provides the following information:
Static budget variable overhead $ 2,300
Static budget fixed overhead $ 23,000
Static budget direct labor hours 575 hours
Static budget number of units 23,000 units
Standard direct labor hours 0.025 hours per fender
Mason Fender allocates manufacturing overhead to production based on standard direct labor hours. Mason Fender reported the following actual results for 2018: actual number of fenders produced, 20,000; actual variable overhead, $5,350; actual fixed overhead, $26,000; actual direct labor hours, 460.
1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
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