Question

Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. HT SY Direct materials (15 lbs. @ $4 per Direct labor (2 hrs. @ $15 per $60 - 30 During May the company incurred the following actual costs to produce 8,900 units. Direct materials (137,200 lbs. @ $3.80 per lb.) Direct labor (21,100 hrs. @ $15.10 per hr.), $521, 360 JA 318, 610 318,610 AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price (1) Compute the direct materials price and quantity varſances. (Indicate the effect of each varlance by selecting for favorable, unfavorable, and no varlance.)

Answer 1

1. Computation of the Materials Price Variance and Quantity Variances : Preparation of Standard Costing Work Sheet : Std. Qty. x Std. Price Particulars SQ SP SQ x SP Material Cost 1,33,500 $ 4.00 $ 5,34,000 Total 1,33,500 $ 5,34,000 Act. Qty. x Act. Price AQ AP AQ X AP | 1,37,200 $ 3.80 $ 5,21,360 1,37,200 $ 5,21,360 Act. Qty. Std. Price AQL SP AQ X SP 1,37,200 $ 4.00 $ 5,48,800 1,37,200 $ 5,48,800 Working Note : SQ = Standard Quantity = 8,900 Units * 15 lbs. = 133,500 Lbs. SP = Standard Price = $ 4.00 per Lb. AQ = Actual Quantity = 137,200 Lbs. AP = Actual Price = $ 3.80 per Lb. Materials Price Variance : Material Price Variance = (Standard Price * Actual Quantity) - (Actual Price * Actual Quantity) Material Price Variance = $ 548,800 - $ 521,360 Material Price Variance = $ 27,440 - Favorable (F) Material Quanity Variance : Material Quanity Variance = (Standard Price * Standard Quantity) - (Standard Price * Actual Quantity) Material Quanity Variance = $ 534,000 - $ 548,800 Material Quanity Variance = $ 14,800 - Unfavorable (U)

2. Computation of the Labor Rate Variance and Efficiency Variances : Preparation of Standard Costing Work Sheet : Std. Hrs. x Std. Rate Particulars SH SR S H X SR Labor Cost 17,800 $ 15.00 $ 2,67,000 Total 17,800 $ 2,67,000 Act. Hrs. x Act. Rate AH AR | AH AR 21,100 $ 15.10 $ 3,18,610 21,100 $ 3,18,610 Act. Hrs. x Std. Rate AH SRL AH X SR 21,100 $ 15.00 $ 3,16,500 21,100 $ 3,16,500 Working Note : SH = Standard Hours = 8,900 Units @ 2 Hrs. per Unit = 17,800 Hours SR = Standard Rate = $ 15.00 per Hour AH = Actual Hours = 21,100 Hours AR = Actual Rate = $ 15.10 per Hour. Labor Rate Variance : Labor Rate Variance = (Standard Rate * Actual Hours) - (Actual Rate * Actual Hours) Labor Rate Variance = $ 316,500 - $ 318,610 Labor Rate Variance = $ 2,110 - Unfavorable (U) Labor Efficiency Variance : Labor Efficiency Variance = (Standard Rate * Standard Hours) - (Standard Rate * Actual Hours) Labor Efficiency Variance = $ 267,000 - $ 316,500 Labor Efficiency Variance = $ 49,500 - Unfavorable (U)