Question

New Jersey Valve Company manufactured 8,300 units during January of a control valve used by milk processors in its Camden plant. Records indicated the following: Direct labor Direct material purchased Direct material used 34,100 hr. at $14.80 per hr. 29,000 lb. at $3.20 per lb. 24,600 lb. The control valve has the following standard prime costs: Direct material 3 lb. at $3.10 per lb. Direct labor 4 hr. at $15.20 per hr. Standard prime cost per unit $ 9.30 60.80 $70.10 Required: 1. Prepare a schedule of standard production costs for January, based on actual production of 8,300 units. 2. For the month of January, compute the following variances.

Answer 1

(A)

Material price variance = actual quantity used x (standard price - actual price)

= 24600 x ($3.10 - $3.20)

= $2460 Unfavorable

(B)

Material quantity variance = standard price x (standard quantity - actual quantity used)

= $3.10 x (24900 - 24600)

= $930 Favorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 8300 x 3 = 24900 lb

(C)

Material price variance = actual quantity purchased x (standard price - actual price)

= 29000 x ($3.10 - $3.20)

= $2900 Unfavorable

(D)

Labor rate variance = actual hours x (standard rate - actual rate)

= 34100 x ($15.20 - $14.80)

= $13640 Favorable

(E)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $15.20 x (33200 - 34100)

= $13680 Unfavorable

Where,

Standard hours = actual output x standard hours per unit of output

= 8300 x 4 = 33200 hours