Question

14) The Rogers Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour. The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March follows:Required:(Be sure to indicate whether the variances are favorable or unfavorable and show your work.) a. Compute the direct material price variance.b. Compute the direct material efficiency variance.c. Compute the direct labor price (rate) variance.d. Compute the direct labor efficiency variance. Number of units produced 6,000 Materials purchased (18,500 yards) S 88,800 Materials used in production (yards) 18,500 Direct labor cost incurred ($6.50/hour) $ 75,400

Answer 1

Answer- a)- Material Price variance= $74000 Unfavorable

Material Quantity variance = $1320 Favorable

Explanation-

Material Price variance = (Standard Price- Actual Price)*Actual quantity purchased

                                         =($4.40 per yard – [$88800/ 18500 yards)*18500 yards

                                         = $7400 Unfavorable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

                                              =(18800 yards – 18500 yards)*$4.40 per yard

                                             = $1320 Favorable

Where:-

Standard Quantity = No. of yards per unit*Actual output

                               = 3 yards per unit *6000 units =18000 yards

b)- Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

                                       = ($6 per hour - $6.50 per hour)* [$75400/$6.50 per hour]

                                       = $5800 Unfavorable

Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour

                                       =(12000 hours – 11600 hours)*$6.00 per hour

                                          = $2400 Favorable

Where:-

Standard Hours = No. of hours per unit*Actual output

                               = 2 hours per unit *6000 units = 12000 hours