Question

Standard Costing

Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established:

Direct materials (4 lbs. @ $0.95)	$ 3.80
Direct labor (1.25 hours @ $15.00)	18.75
Standard prime cost	22.55

During December, 78,000 pounds of material were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs:

Direct materials	$ 74,000
Direct labor	$315,000 (for 22,500 hrs.)

Required:

1. Compute the materials variances. If there is no variance, enter "0" in the amount box and select "No variance" from the dropdown menu.

Materials price variance	$
Materials usage variance	$
Overall materials variance	$

2. Compute the labor variances. If there is no variance, enter "0" in the amount box and select "No variance" from the dropdown menu.

Labor rate variance	$
Labor efficiency variance	$
Overall labor variance	$

Answer 1

Materials Price Variance = (SP-AP) *AQ = (0.95-74,000/78,000)*78000	100 F
Materials usage variance = (SQ-AQ) *SP = (15,000*4 - 78,000)*0.95	17,100 U
Overall materials variance	17,000 U

.

Labor Rate Variance = (SR-AR) *AH = (15-315000/22500)*22500	22500 F
Labor efficiency variance = (SH-AH) *SR = (15,000*1.25 - 22500)*15	56,250 U
Overall variance	33,750 U

Comment if you face any issues