Question

Help, please. I have test

Problem 2 (10 points) Martin Racing Company gathered the following actual results for the current month: Actual amounts: Units produced 3,000 Direct materials purchased and used (5.400 lbs.) $21,600 Direct labor cost (4,600 hours) $36,800 Manufacturing overhead costs incurred $17,650 Budgeted production and standard costs were: Budgeted production Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 3,500 units 2 lbs./unit at $4.25/1b. 1.5 hrs./unit at $7.50/hr. $5 per unit $21,000 What is the direct materials price variance? What is the direct materials efficiency variance? What is the direct labor price variance? What is the direct labor efficiency variance?

Answer 1

Direct Material Price Variance = Actual Quantity * (Standard Price - Actual Price)

Actual Quantity = 5400 lbs

Standard Price = $ 4.25

Actual Price = Value of actual materials used/Actual Quantity Used

= $21,600/5400 lbs

= $ 4

Hence,  Direct Material Price Variance = 5400 (4.25 - 4) = $ 1350 [Favorable since actual price is less than standard price]

Direct Material Efficiency Variance = Standard Price * (Standard Quantity - Actual Quantity)

= $ 4.25 * [(3000*2)- 5400 lbs)]

= $ 2550 [Favorable since actual quantity used is less than standard quantity]

Direct Labor Price Variance = Actual Hours * (Standard Rate - Actual rate)

= 4600 * [$ 7.5 - ($36800/4600)]

= 4600 *( - 0.5)

= $ - 2300 [Unfavorable since actual rate of labor is more than standard]

Direct Labor Efficiency variance = Standard Rate * (Standard Hours - Actual Hours)

= $ 7.5 [(3000 * 1.5) - 4600]

= $ - 750 [Unfavorable since actual hours required were more than standard]