Question

Diane Buswell examined some of the accounting records and reported that Current Designs purchased 1,200 pounds of pellets for this order at a total cost of $2,040.20 finishing kits were assembled at a total cost of $3,240. The payroll records showed that the type I employees worked 38 hours on this project at a total cost of $570. The type II finishing employees worked 65 hours at a total cost of $796.25. A total of 20 kayaks were produced for this order. The standards that had been developed for this model of kayak were used in CD2 and are reproduced here. For each kayak: 54 pounds of polyethylene powder at $1.50 per pound 1 finishing kit (rope, seat, hardware, etc.) at $170 2 hours of type I labor from people who run the oven and trim the plastic at a standard wage rate of $15 per hour 3 hours of type Il labor from people who attach the hatches and seat and other hardware at a standard wage rate of $12 per hour. Calculate the eight variances that are listed below. (Round price variance for type II workers to 2 decimal places, e.g. 15.25 and all other answers to 0 decimal places, e.g. 25.) Quantity variance for polyethylene powder Unfavorable Price variance for polyethylene powder Unfavorable Quantity variance for finishing kits Unfavorable Price variance for finishing kits Favorable Quantity variance for type I workers Favorable Price variance for type I workers Unfavorable Quantity variance for type II workers Unfavorable Price variance for type II workers Unfavorable

Answer 1

Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
Polyethylene Powder = (1200 - 20 x 54) x $1.50 = $180 (U)
Finishing Kits = (20 - 20) x $170 = 0

Material Price Variance = Actual Cost - Actual Quantity x Standard Price
Polyethylene Powder = $2040 - 1200 x $1.50 = $240 (U)
Finishing Kits = $3240 - 20 x $170 = $160 (F)

Labor Quantity Variance = (Actual hours - Standard hours) x Standard Rate
Type I = (38 - 20x2) x $15 = $30 (F)
Type II = (65 - 20 x3) x $12 = $60 (U)

Labor Price Variance = Actual Cost - Actual hours x Standard Rate
Type I = $570 - 38 x $15 = 0
Type II = $796.25 - 65 x $12 = $16.25 (U)