Question

Use the following information to answer the next four questions For each unit produced, a company expects to use 4.5 pounds of material at a cost of $3.25 per pound. It also expects each unit to require 1.75 hours of direct labor to complete, and it expects the wage rate to be $13 per hour. During the month, the company purchased 35,000 pounds of material for $105.000, and used all 35,000 pounds of material to produce 8,000 units. The company actually incuited direct labor costs amounting to $177.000 for the 15,000 direct labor hours actually worked during the month. What is the company's direct materials price variance? Indicate whether the variance is favorable or unfavorable. 5. What is the company's direct materials quantity variance? Indicate whether the variance is favorable or unfavorable.

Answer 1

4) Computation of direct material price Variance - Actual Quantity x standard price - Actual Quantity & Actual price = 135000 pound 3 x $3.25] [35000 pounds x83] = $ 113750 - $ 105000 E $8750 Ti-Direct material price variance = $8750 favorable 15 I Direct waterial quantity variance on = stand quantity & standard price] - - c Lactual quantity & standard price] 14:5*8000 * $3:25 - 35000 x $3.257 abo $ 117000 - $1137506 = $3250 Direct matericel quantity bariance =$3250! favourable

6) computation direct labour rate varianca = Actual hours a standard rated (-) LActual hours x Actreal rate = 15000 hours $132-5000 hours 11.8] & $195000 - $1770oo E $18000 8. Direct labour rate variance = $ 18000 favocerable 7 Direct labour efficiency variance - standard hourst standard rate - Lactual hours & Standard rate ell:75%8000 $13 - 6000 $137 = $ 1482000 - $ 195,000 = - $13000 WIU .: Direct Do laboure efficiency variance - $ 13000 unfavourable