Question

During June, Fraser Company’s material purchases amounted to 4,700 pounds at a price of $8.50 per pound. Actual costs incurred in the production of 1,000 units were as follows:

Direct labor:	$	89,351	($19.9 per hour)
Direct material:	$	19,635	($8.50 per pound)

The standards for one unit of Fraser Company’s product are as follows:

Direct labor:	Direct material:
Quantity, 2.7 hours per unit	Quantity, 1.6 pounds per unit
Rate, $19.7 per hour	Price, $8.00 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 "0" 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 Direct-labor efficiency variance

Answer 1

Correct Answer:

Direct Material Price Variance	$        1,155.00	Unfavorable-U
Material quantity variance	$        5,680.00	Unfavorable-U
Direct Material Purchase Price Variance	$        6,835.00	Unfavorable-U
Labor rate variance	$           898.00	Unfavorable-U
Labor Efficiency variance	$     35,263.00	Unfavorable-U

Working:

Actual DATA for		1000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	2310	$            8.50	$      19,635.00
Direct labor	4490	$         19.90	$      89,351.00

Standard DATA for		1000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	1600	$            8.00	$      12,800.00
Direct labor	2700	$         19.70	$      53,190.00

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    8.00	-	$                     8.50	)	x	2310
	-1155
	Variance		$             1,155.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	1600	-	2310	)	x	$       8.00
	-5680
	Variance		$             5,680.00			Unfavourable-U
Direct Material Purchase Price Variance
(	Standard Cost	-	Actual Cost	)
(	$         12,800.00	-	$           19,635.00	)
	-6835
	Variance		$             6,835.00			Unfavourable-U
Labour Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  19.70	-	$                   19.90	)	x	4490
	-898
	Variance		$                 898.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2700	-	4490	)	x	$    19.70
	-35263
	Variance		$           35,263.00			Unfavourable-U

End of answer.

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