Question

can you please help with E10.27 Q1

0.27 -10.5 Direct material and direct labour variances: service firm Stephen Ltd is engaged in aerial spraying of vegetables, Operating costs are difficult to control, so standara costs and standard cost variances are reported. The following standards were developed for the "maxiprotect' spraying service. This is one of the company's major products. Direct material (insecticide) Direct labour Total Standard quantity 8 kilograms 2 hours Standard price or rate $3.50 per kilogram S40 per hour Standard cost $ 28,00 80.00 S108.00 During May. Stephen purchased 160 000 kilograms of insecticide at a total cost of $608 000. The total wages for May were $10000.40 per cent of which was direct labour cost of the maxiprotect sprays, Stephen completed 40 maxiprotect sprays during May, using 400 kilograms of insecticide and 90 direct labour hours. Required: 1. Construct an Excel spreadsheet to calculate the following variances for May, and indicate whether each is favourable or unfavourable: (a) direct material price variance (b) direct material quantity variance (c) direct labour rate variance (d) direct labour efficiency variance.

Answer 1

Standard untity standard price Actual Quantity utrams $3.50 per kilogram a) direct material price voxiance Actual Quantity & Standard price poong x $3.50 = $1400. Actual Quantity & Actual price. 4oong x $3.80= $1520. $1520-$1400 = $120 Adverse Note: Actual price = $608000 = $3.8 160000 Actual price > standard price, hence Adverse b) direct material quantity variance Standard Quantity x standard price 40 units X 8 kilogram x $3.50 = $1120 Actual Quantity & standard price 400 kg x $3.50 = $1400.

$1400 - $1120 = $280 Adverse Note stondoa Que stondard Quantity = Adual units X stundood Quantity per unit Actual Quantity > Standard quanlity, hence adverse. direct labour rate variance Actual hour x Standard rate. 90 hour X $40 = $3600 Actual hour & Actual rate. 90 hour x $44.44 - $4000 $ 4000-$3600 = $400 Actual rate > Standard Adverse. Adverse sate, hence Note: in Question itself says to Actual total cost of laboud is 40% of $10000, which is 4.000. Actual cost per hous = $4000 9o hold = $44.44

d) direct labour efficiency variance & Standard rate Standard hour 40 units X 2 hour X $40 - $3200 Actual hour 90h X X standard rate $40= $3600. $3600- $3200= $400 Adreose Note: - Actual hour > standard hour, hence Adve ose Standard hour - Actual unit * Standard hour per unit.