Can you please explain why it favorable and unfavorable. thank you. P 9-A Variance Analysis (In...

Material price variance =(standard cost per unit - actual cost per unit )*actual quantity purchased

( $6 - $5.40)* 20000= F $12000

The actual price is lower than the estimated standard price hence there is a reduction in cost and therefore it is profitable.

Material Quantity Variance = (standard quantity - actual quantity) * standard price

= ( $17500 -$ 20000)*$6 = A $15000

The actual quantity of material used for the production is more than the standard for the same level of production and hence it is adverse in nature.

Labour rate variance = (standard rate per hr- actual rate per hour ) * actual hours

( 18 - 20)* 10500 = A 21,000

The actual labour rate charged by the labour is higher than the standard rate set,it increases the labour cost per hour and hence it is adverse in nature.

Labour effeciency variance =(standard hours allowed - actual hours worked)*standard rate

= ( 10000-10500)* 18 = A 9000

There is reduction in the efficiency of labourers in comparison to the standard set the labours are taking 500 hours more to complete the job and hence it is unfavourable/adverse.

Variable overheads rate variance = (standard rate per hour - actual rate per hour )* actual hours

( $4 - $ 3.9)* 10500=F 1050

The actual standard rate per hour is less that the standard set and hence there is a reduction in cost and it is favourable