Question

During June, Fraser Company's material purchases amounted to 4,600 pounds at a price of $10.00 per pound. Actual costs incurred in the production of 1,000 units were as follows: Direct labor: Direct material: $ 81,270 ($18.9 per hour) $28,200 ($10.00 per pound) The standards for one unit of Fraser Company's product are as follows: Direct labor: Quantity, 2.7 hours per unit Rate, $18.7 per hour Direct material: Quantity, 2.1 pounds per unit Price, $9.50 per pound Required: Compute the following variances for the month of June. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) 1. Direct-material price variance 2. Direct-material quantity variance 3. Direct-material purchase price variance 4. Direct-labor rate variance 5. Direct-labor efficiency variance

Answer 1

Solution

Material Price Variance	$ 1,410.00	Unfavourable-U
Material quantity variance	$           6,840.00	Unfavourable-U
Direct material purchase price variance	$ 2,300.00	Unfavourable-U
Labor rate variance	$               860.00	Unfavourable-U
Labor Efficiency variance	$         29,920.00	Unfavourable-U

Working

Material Purchase Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    9.50	-	$                   10.00	)	x	4600
	-2300
	Variance		$             2,300.00			Unfavourable-U

.

Standard DATA for		1000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 2.1 pound x 1000 Units)=2100 pound	$                   9.50	$            19,950.00
Direct labor	( 2.7 Hour x 1000 Units)=2700 Hour	$                18.70	$            50,490.00

.

Actual DATA for		1000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	2820	$     10.00	$          28,200.00
Direct labor	4300	$     18.90	$          81,270.00

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    9.50	-	$                   10.00	)	x	2820
	-1410
	Variance		$             1,410.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	2100	-	2820	)	x	$              9.50
	-6840
	Variance		$             6,840.00			Unfavourable-U

.

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  18.70	-	$                   18.90	)	x	4300
	-860
	Variance		$                 860.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2700	-	4300	)	x	$           18.70
	-29920
	Variance		$           29,920.00			Unfavourable-U