Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.

Costs and Production Data		Actual		Standard
Raw materials unit cost		$2.20		$2.00
Raw materials units used		11,200		10,300
Direct labor payroll		$175,820		$169,830
Direct labor hours worked		14,900		15,300
Manufacturing overhead incurred		$202,750
Manufacturing overhead applied				$206,550
Machine hours expected to be used at normal capacity				43,500
Budgeted fixed overhead for June				$65,250
Variable overhead rate per machine hour				$3.00
Fixed overhead rate per machine hour				$1.50

Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $489,000. Selling and administrative expenses were $35,800. Assume that the amount of raw materials purchased equaled the amount used.

(a)

Compute all of the variances for (1) direct materials and (2) direct labor. (Round answers to 0 decimal places, e.g. 125.)

(1)		Total materials variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Materials price variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Materials quantity variance		$		FavorableUnfavorableNeither favorable nor unfavorable
(2)		Total labor variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Labor price variance		$		FavorableUnfavorableNeither favorable nor unfavorable
		Labor quantity variance		$		FavorableUnfavorableNeither favorable nor unfavorable

Answer 1

Variance Analysis Data Standard Price SP 2.00 PerUnit Standard Quantity for Actual Output 10300 Units Actual Quanity Used AQ 11200 Units Actual Price of Material AP 2.20 PerUnit Standard Rate=169830/15300 SR 11.10 Per hour Standard Hours for Actual output SH 15300 Hours Actual hours Worked AH 14900 hours Actual Rate =(175820/14900) AR 11.80 Per hour Answers Total Material Variance 4040 Unfavorable Mateial Price Variance (SP-AP)* AQ purchased =(2.20-2.00)*11200 2240 Unfavorable Matrial Quanity Varaince (SQ-AQ)*SP=(10300-11200)*2.00 1800 Unfavorable Labor Variance Total labor Variance 5990 Unfavorable Labour Price Varaince (SR-AR)*AH=(11.80-11.10)*14900 10430 Unfavorable Labour Quantity Varaince (SH-AH)*SR=(15300-14900)*11.10 4440 Favorable