Question

Betty's Bakery has the following standard cost sheet for one unit of its most popular cake: Direct materials Direct labor 1.2 pounds 0.8 hours SP $ 1.50 per pound $12.00 per hour During the month of May, the company made 600 cakes and incurred the following actual costs. Direct materials purchased and used (900 pounds) $1,170 Direct labor (660 hours) $7,590 Required: 1. Calculate the direct materials price variance. 2. Calculate the direct materials quantity variance. 3. Calculate the direct materials spending variance, 4. Calculate the direct labor rate variance. 5. Calculate the direct labor efficiency variance. 6. Calculate the direct labor spending variance. (For all requirements, Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) 1 2 Direct materials price variance Direct materials quantity variance Total direct materials spending variance Direct labor rate variance Direct labor efficiency variance Total direct labor spending variance 390 % 2448

Answer 1

1. Materials price variance = (Standard price - actual price) x Material purchased
= {1.50 - ($1170/900)} x 900 = $180 Favorable

2. Materials quantity variance = (Standard quantity - actual quantity used) x standard price
= {(600*1.2) - 900} x $1.50 = $270 Unfavorable

3. Materials spending variance = 600*1.2*1.5 - 1170 = $90 Unfavorable

4. Labor rate variance = (Standard rate - actual rate) x Actual hours used
= {$12 - ($7590/660) x 660 = $330 Favorable

5. Labor efficiency variance = (Standard hours - actual hours) x Standard rate
= {(600*0.8) - 660} x $12 = $2160 Unfavorable

6. Labor spending variance = 600*.8*12 - 7590 = $1830 Unfavorable