Question

Horngren's accounting 12 edition, Chapter 23 problem 22E, is worked out but with results

was the $1500 favorable direct materials cost variance for management a positive or negative?

What does $6,600 favorable direct materials efficiency variance indicate what?

Then the $4,200 unfavorable direct labor cost variance indicates management did what?

Then we have the $2,700 favorable direct labor efficiency variance indicates that management did good but in allocating time, money, budget?

The $2,800 unfavorable variable overhead cost?

The $1,100 unfavorable variable overhead efficiency variance?

The $2,300 unfavorable fixed overhead cost variance

The $8,300 favorable fixed overhead volume variance

I know variances or imbalances gives us questions that show problems and issues but how do we process the positive and negative numbers

Answer 1

1. $1500 favorable material cost variance means it is positive for the management as it means that cost is 1500 less than what was expected during the period.

2. 6600 favorable material efficiency variance means it has used 6600 cost of less material that the material use was expected and 6600 reduction is cost is not due to price of material but effecively utilisation of material.

3. 4200 unfavorable means more of labor cost is used than expected so this is negative for management.

4. 2700 favorable direct labor efficiency means management has performed well in reducing the number of hours that were required when budgted.