Question

Part of your company's accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance). Round "per unit" answer values to 2 decimal places.) s Standard price or rate per unit of input Standard quantity per unit of output Actual quantity used per unit of output Actual price or rate per unit of input Actual output Direct-material price variance Direct-material quantity variance Direct Labor per hour hours per unit 2.00 hours 13.00 per hour 6,000 units Direct Material 9.00 per lb lbs per unit lbs per unit 8.00 per lb 6,000 units 40,200 F $ $ $ 29,400 F Total direct-material variance Direct-labor rate variance Direct-labor efficiency variance Total direct-labor variance $ $ 28,800 F 16,800 F

Answer 1

1) Calculation of Direct Labor Rate Variance :

Direct Labor rate variance = Total direct labor variance - Direct labor efficiency variance

= $ 28,800 (F) - $ 16,800 (F)

= $ 12,000 (U)

2) Calculation of Direct material Quantity variance:

Direct material quantity variance = Total Direct Material variance - Direct material price variance

= $ 29,400 (F) - $ 40,200 (F)

= 10,800 (U)
3) Calculation of Standard rate per unit of output:

Direct Labor Rate variance = Standard rate per hour-Actual rate per hour*(Actual Hours worked)

$(12,000) = Standard rate per hour-$ 13 *( 6,000 units * 2 hours per unit)

  $(12,000)   = Standard rate per hour-$ 13 *(12,000 hours)

$(12,000)/12,000 hrs = Standard rate per hour-$ 13

$(1) = Standard rate per hour-$ 13

$(1) + $ 13 = Standard rate per hour

  Standard rate per hour = $12

4) Calculation of Actual Quantity of direct material per unit of output:

Direct Material Price variance =(Standard Price per unit - Actual Price per unit)* Actual quantity

$40,200 =($ 9 per lb - $8 per lb)* 6,000 units* Actual quantity per unit

$40,200 = $1 per lb * 6,000 units* Actual quantity per unit

$ 40,200/$6,000 =   Actual quantity per unit

6.70 lbs =   Actual quantity per unit

5) Calculation of Standard quantity per unit of output :

a) Standard labor hours per unit of output

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

$28,800   = (Standard hours - 2 hours*6,000 units)* $ 12

$28,800 /$ 12 = (Standard hours - 12,000 hours)

2,400 hours     = (Standard hours - 12,000 hours)

   2,400 hrs + 12,000 hrs = Standard hours

14,400 hrs = Standard hours

Standard labor hour per unit = Standard hours / No. of Units

= 14,400 hours / 6,000 units

= 2.40 hours

b) Standard quantity of direct material per unit of output:

Standard Direct Material quantity variance = (Actual usage in units - Standard usage in units) x Standard price per unit

   $ 10,800 = ( 6.70 lbs * 6,000 units - Standard usage per unit * 6,000 units)* $ 9.00 per lb

$ 10,800 = ( 40,200 lbs - Standard usage per unit * 6,000 units)* $ 9.00 per lb

$ 10,800/$ 9.00 per lb = ( 40,200 lbs - Standard usage per unit * 6,000 units)

1,200 lbs = ( 40,200 lbs - Standard usage per unit * 6,000 units)

  Standard usage per unit * 6,000 units = 40,200 lbs - 1,200 lbs

  Standard usage per unit * 6,000 units = 39,000 lbs

  Standard usage per unit = 39,000 / 6,000 units

  Standard quantity per unit of output = 6.50lbs per unit

	Direct labor		Direct Material
Standard price or rate per unit of output		per hour	$9.00	per lb
Standard quantity per unit of output	2.40	hours per unit	6.50	lbs per unit
Actual quantity used per unit of output	2	hours	6.70	lbs per unit
Actual price or rate per unit of output	$ 13.00	per hour	$8.000	per lb
Actual Output	6,000	units	6,000	units
Direct material price variance			$40,200	F
Direct material quantity variance			$10,800	U
Total Direct Material variance			$29,400	F
Direct Labor Rate variance	$ 12,000	U
Direct Labor Efficiency variance	$ 28,800	F
Total Direct labor variance	$ 16,800	F