Question

Your company produces, among other things, a ceramic statue of the Cheshire Cat of Alice in Wonderland fame. During the previous month 3,000 statues were both started and completed. The standard costs for producing Cheshire Cat are the following: raw materials - 1/2 pound @ $4 per pound; labor - 15 minutes @ $12 per hour Accounting records show that 1600 pounds of raw materials costing $6,000 were purchased and used. Also, direct labor amounting to $9750 for 750 hours was spent.

Using the information from the description above, calculate the two materials variances AND two labor variances. Show your work and label each variance favorable or unfavorable.

Answer 1

Answer

• Requirement:

--Two Material Variances:

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                4.00	-	$                       3.75	)	x	1600
	400
	Variance		$                  400.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	1500	-	1600	)	x	$                           4.00
	-400
	Variance		$                  400.00			Unfavourable-U

--Two Labor Variances

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              12.00	-	$                    13.00	)	x	750
	-750
	Variance		$                  750.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	750	-	750	)	x	$                        12.00
	0
	Variance		$                           -			None or Favourable