Question

Use the following information to answer Questions 1 through 4. Skokie Company produces aquariums. During the year 150,000 aquariums were produced. Direct materials and direct labor standards for producing the aquariums are as follows. SKOKIE COMPANY DIRECT MATERIALS AND DIRECT LABOR STANDARDS FOR PRODUCTION OF AQUARIUMS Direct materials (2 sheets of glass at $2.00 per sheet) S 4.00 Direct labor (3 hours at $8.00 per hour) 24.00 Skokie purchased and used 310,000 sheets of glass at $1.50 each and its actual labor hours were 435,000 hours at an average wage rate of $8.50. What is the direct materials price variance? (a) S 20,000 F. (b) $155.000 F. (c) $ 20,000 U. (d) $155,000 U. (a) What is the direct materials quantity variance? $ 20,000 F. (b) $155.000 F. $ 20,000 U. (d) $155,000 U.

Answer 1

Standard price Standard Qty (2 sheets x 150000) Actual Price Actual Quantity 2.00 per sheet 300000 sheets 1.50 per sheet 310000 sheets Material Price Variance (Actual Price - Standard Price) x Actual Quantity ($ 1.50 - $ 2.00) x 310000 sheets $1,55,000.00 F Option (b) $155000 is the correct answer Material Quantity Variance (Actual Quantity - Standard Quantity) x Standard Price (310000 - 300000) x 2 $ 20,000.00 U Option (c) $20000 is the correct answer Standard Labour Rate Standard Labour Hours (3 hrs x 150000) Actual Labour Rate Actual Labour Hours 8.00 per hour 450000 hours 8.50 per hour 435000 hours Labor rate Variance (Actual Rate - Standard Rate) x Actual hours worked ($8.50 - $8.00) x 435000 $ 2,17,500.00 U Option (d) $217500 is the correct answer Labor Efficiency Variance = (Actual hours - Standard hours) x Standard rate = (435000 - 450000) < $8.00 $ 1,20,000.00 F Option (c) $120000 is the correct answer

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