Perez Company Adopted a Standard Cost System Several Years Ago

question 16

Essay

Perez Company adopted a standard cost system several years ago.The standard costs for the prime costs of its single product follow: The following operating data were taken from the records for November: Compute the following:
a.Labor rate variance
b.Labor efficiency variance
c.Actual kilograms of material used in the production process
d.Actual cost paid per kilogram of material

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Definitions:

Variable Overhead Efficiency Variance

Variable Overhead Efficiency Variance is the difference between the standard cost of variable overheads for the actual production and the actual variable overheads incurred, often attributed to efficiency in utilizing variable resources.

Variable Overhead

Indirect production costs that change in response to the level of production activity, such as utility costs in a manufacturing plant that vary with machine usage.

Rate Variances

The difference between the expected (standard) cost and the actual cost incurred for a rate-based expense, such as labor or materials.

Lubricants

Substances applied to surfaces to reduce friction, protect against wear, or provide lubrication, often essential in machinery and manufacturing processes.