Question

Variance Computations and Explanations Outdoor Company manufactures camping tents from a lightweight synthetic fabric. Each tent has a standard materials cost of $20, consisting of 4 yards of fabric at $5 per yard. The standards call for 2 hours of assembly at $11 per hour. The following data were recorded for October, the first month of operations: Fabric purchased 9,000 yards * $4.70 per yard Fabric used in production of 1,600 tents 7,000 yards Direct labor used 3,300 hours * $11.50 per hour (a) Compute all standard cost variances for materials and labor. Support Materials price variance (usage basis) $ Materials price variance (purchase basis) $ Materials quantity variance Labor rate variance Labor efficiency variance 0xF OXF OXU OXU OXU

Answer 1

Solution a. Actual Material Purhased ($) Actual Material Purhased (yards) Actual Material price per yard Standard Material per tent $ 42,300.00 9000 yards $ 4.70 4 yards 6400 yards Standard Qty for 1600 tents Standard rate 5.00 Material Price Variance (use (Actual Price Standard Price) x Actual Quantity used ($4.70 - $5.00) x 7000 2,100.00 Favourable Material Price Variance (Purchase Basis) (Actual Price Standard Price) x Actual Quantity ($4.70 - $5.00) x 9000 2,700.00 Favourable (Actual Quantity - Standard Quantity) x Standard Price (7000 units-6400 units) x $5.00 600 pounds x $5.00 $ Material Quantity Variance 3,000.00 Unfavourable Standard Labour hours 2 hours x 1600 tents 3200 hours $ 11.00 per hour Standar Labour hour rate Actual Labour hours (A) Actual Labour hour rate (B) Actual Labour Cost (Ax B) 3300 hours $ $ 11.50 per hour 37,950.00 Labor rate Variance (Actual Rate - Standard Rate) x Actual hours worked ($11.50 $11.00) x 3200 $0.5 x 3200 $ 1,600.00 Unfavourable Labor Efficiency Variance (Actual hours - Standard hours) x Standard rate (3300 3200) x $11.00 100 hours x $11 1,100.00 Unfavourable

Solution c Computation of Standard cost of 1600 tents Particulars Amount 1600 x 4 yards x $5 $32,000.00 1600 x 2 hours x $1: $35,200.00 Direct Materials Direct Labour $67,200.00 Total Standard Variable costs

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