Question

The following chart summarizes the direct materials and direct labor variances from November of last year through April of this year (extracted from the report provided by Matt). Standards for each laptop cover are as follows: a. Three feet of direct materials at $7.50 per foot b. Forty-five minutes of direct labor at $14 per hour. Actual Cost Direct Materials (Direct Direct Direct Labor Direct Labor Efficiency Materials Materials Efficiency Rate Direct Labor) Price Variance Variance Month Variance Variance November $150,000 $100 $5,000 F $10,000 U $5,000 F U December 155,000 11,000 U 5,200 F 110 U 6,500 F 10,100 7,750 F January 152,000 U 4,900 F 105 U February 9,900 151,000 4,500 F 95 U 6,950 F March 125,000 9,000 U 3,000 F 90 U 8,200 F 2,000 April 115,000 8,000 90 U 8,500 F In addition, the data for May of this year, but not the variances for the month, are as follows: 2,900 units Laptop covers made in May Total actual direct materials costs incurred $68,850 Actual quantity of direct materials purchased and used 8,500 feet $ 25,910 Total actual direct labor cost incurred Total actual direct labor hours 1,837.6 hours Actual direct labor cost per hour exceeded the budgeted rate by $0.10 per hour. Required: For May of this year, calculate the price and quantity variances for direct labor and direct materials. Round intermediate calculations and final answers to two decimal places. MPV MUV $ LRV $ LEV

Answer 1

(A)

Material price variance = actual quantity x (standard price - actual price)

= 8500 x ($7.50 - $8.10)

= $5100 Unfavorable

Where,

Actual price = material cost paid/units of material purchased

= $68850/8500 = $8.10

(B)

Material quantity variance = standard price x (standard quantity - actual quantity)

= $7.50 x (8700 - 8500)

= $1500 Favorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 2900 x 3 = 8700 feet

(C)

Labor rate variance = actual hours x (standard rate - actual rate)

= 1837.6 x ($14 - $14.10)

= $183.76 Unfavorable

Where,

Actual rate = actual labor cost/actual hours

= $25910/1837.6 = $14.10

(D)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $14 x (2175 - 1837.6)

= $4723.60 Favorable

Where,

Standard hours = actual output x standard hours per unit of output

= 2900 x (45/60) = 2175 hours