# Variance Analysis For Decision Making

Variance Analysis For Decision Making

Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is

applied on the basis of direct labor hours. The following information is given:

Standard costs per unit:

Raw materials (1.5 grams at \$16 per gram) ………………………. \$24.00

Direct labor (0.75 hours at \$8 per hour)……………………………. \$6.00

Variable overhead (0.75 hours at \$3 per hour)…………………… \$2.25

Actual experience for current year:

Units produced ……………………………………………………………… 22,400 units

Purchases of raw materials (21,000 grams at \$17 per gram) .. \$357,000

Raw materials used………………………………………………………… 33,400 grams

Direct labor (16,750 hours at \$8 per hour)………………………… \$134,000

Required:

Compute the following variances for raw materials, direct labor, and variable overhead,

assuming that the price variance for materials is recognized at point of purchase:

a. Direct materials price variance.

b. Direct materials quantity variance.

c. Direct labor rate variance.

d. Direct labor efficiency variance.