Question

Vernon Manufacturing Company produces a single product. The following data apply to the standard cost of materials and labor associated with making the product: Materials quantity per unit Materials price Labor quantity per unit Labor price 1 pound $ 6.60 per pound 2 hours $10.60 per hour During the year, the company made 2,120 units of product. At the end of the year, the following variances had been calculated. Materials usage variance Materials price variance Labor usage variance Labor price variance $1,584 Favorable $ 188 Unfavorable $3,816 Unfavorable $3,910 Favorable Required a. Determine the actual amount of materials used. b. Determine the actual price paid per pound for materials. (Round your answer to 2 decimal places.) c. Determine the actual labor hours used. d. Determine the actual labor price per hour. (Round your answer to 2 decimal places.) a. pounds Actual quantity Actual price (materials) b. per pound C. Actual labor hours d. Actual labor price per hour

Answer 1

a.	Materials usage variance=SR*(SQ-AQ)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	Materials usage variance=$ 1584 favorable=1584
	SR=Standard Rate=$6.60 per pound
	SQ=Standard Quantity=Actual production*Standard quantity of materials rquired per unit=2120*1=2120 pounds
	AQ=Actual amount of materials used
	6.60*(2120-AQ)=1584
	(2120-AQ)=1584/6.60
	(2120-AQ)=240
	AQ=2120-240=1880 pounds
	Actual quantity=1880 pounds
b.	Materials price variance=AQ*(SR-AR)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	Materials price variance=$ 188 U=-188
	AQ=Actual amount of materials used=1880 pounds
	SR=Standard Rate=$6.60 per pound
	AR=Actual price paid per pound
	.-188=1880*(6.6-AR)
	.-188=1880*6.60-1880*AR
	.-188=12408-1880AR
	1880AR=12408+188
	1880AR=12596
	AR=12596/1880=$ 6.7
	Actual price paid per pound=$ 6.70
c.	Labor usage variance=SR*(SLH-ALH)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	Labor usage variance=$ 3816 U=-3816
	SR=Standard labor rate per hour=$10.60 per hour
	SLH=Standard labor hours=Actual production*Standard quantity of labor hours required per unit=2120*2=4240
	ALH=Actual labor hours used
	10.60*(4240-ALH)=-3816
	(10.60*4240)-(10.60*ALH)=-3816
	44944-10.60ALH=-3816
	10.60ALH=44944+3816
	10.60ALH=48760
	ALH=48760/10.60=4600
	Actual labor hours used=4600
d.	Labor price variance=ALH*(SR-AR)
	If the answer is positive,variance is favorable.Otherwise,unfavorable
	Where
	Labor price variance=$ 3910 F=3910
	ALH=Actual labor hours used=4600
	SR=Standard labor rate per hour=$10.60 per hour
	AR=Actual labor price per hour
	4660*(10.60-AR)=3910
	(4660*10.60)-(4660*AR)=3910
	49396-4660AR=3910
	4660AR=49396-3910
	4660AR=45486
	AR=45486/4660=$ 9.76