Question

Hemandez Corporation uses a standard cost system and has established the following standards for one unit of product: Standard Quantity 10 pounds 25 hour Standard Cost $26.00 Price Direct materials Direct labor $2.60 per pound $10.00 per hour2.50 $28.50 During October, the company purchased 240,000 pounds of material at a total cost of $588,000. The total factory wages for October were $49,400. During October, 21,000 units ofproduct were manufactured using 211,000 pounds of material and 5,200 direct labor hours. Material quantity andprice variances are recorded when materials are used a. Compute the material quantity and labor efficiency variances. b. Compute the material price and labor rate variances. Show whether each of the above variances was either favorable or unfavorable. StandardActual Quantity QuantityDifferenceCost Variance or Hours Standard or Hours Materials Quantity Variance Labor Efficiency Variance Actual StandardActual Cost Difference aoursVariance Cost Materials Price Variance Labor Rate Variance

Answer 1

Solution a:

Compuation of material quantity and labor efficiency variance
Particulars	Standard Quantity/hours	Actual Quantity/hours	Difference	Standard cost	Variance
Material quantity variance	210000	211000	-1000	$2.60	-$2,600.00	U
Labor efficiency variance	5250	5200	50	$10.00	$500.00	F

Solution b:

Compuation of Material Price and labor rate variance
Particulars	Standard cost	Actual cost	Difference	Acutal quantity / hours	Variance
Materials price variance	$2.60	$2.45	$0.15	211000	$31,650.00	F
Labor rate variance	$10.00	$9.50	$0.50	5200	$2,600.00	F