An automobile manufacturer sets standard costs for a model: Direct materials $400/unit, direct labor $200/unit, overhead $300/unit, actual production 1,000 units, actual costs incurred $850,000.

• Requirements:
  • Calculate the material, labor, and overhead variances using the standard costing method.
  • Analyze the causes of variances and recommend corrective actions.
  • Prepare a variance analysis report for management review.
  • Discuss how standard costing helps in cost control and decision-making.
  • Evaluate the effectiveness of standard costing in a dynamic manufacturing environment.