Question

U1, LP to sell all units produced at practical and theore CITU ps from Incomplete Data Xcel local home building supply PROBLEM 10-34 Materials and Labour Variances; Computations from Ines [LOI, LO2, LO3] Grand River Manufacturing produces a metal flange that it sells to several local he retailers. The company has set standards as follows for materials and labour: Direct Materials Direct Labour ? hours Standard quantity or hours per unit ........ Standard price or rate......... Standard cost per unit. . . . . . . . . . . . . . . . 1.5 kilograms $3 per kilogram $4.50 $? per hour $? During the past month, the company purchased 1,500 kilograms of direct materials at a costo $4,200. All of this material was used in the production of 840 units of product using 425 hours of direc labour. Direct labour cost totalled $4,675 for the month. The following variances have been computed: Labour rate variance........ Total labour variance ..... Materials quantity variance..... $425 U $375 F $75 U

Answer 1

Note:- What is required to be calculated is not given in question, so we have calculated ? mark figures.

Calculation of Labor Efficiency Variance:-
a	Total labor variance			$                           375	F
b	Labor Rate Variance			$                           425	U
c	Labor Efficiency Variance (a+b)			$                           800	F
Calculation of Actual labor Rate per hour-
a	Actual Direct labor Cost			$                        4,675
b	Actual direct labor-hours			425	hours
c	Actual direct labor cost per hour (a/b)			$                        11.00
Calculation of Standard labor Rate per hour-
Direct labor rate variance	=	Actual labor hours	× (	Actual Rate	-	Standard Rate	)
$425	=	425	× (	$11.00	-	Standard Rate	)
425/425	=			$11.00	-	Standard Rate
$1.00	=			$11.00	-	Standard Rate
Standard Rate	=			$11.00	-	$1.00
Standard Rate	=			$10.00
Calculation of Standard labor hours:-
Direct labor Efficiency Variance	=	Standard Rate	× (	Actual labor hours	-	Standard labor hours	)
-$800	=	$10.00	× (	425	-	Standard labor hours	)
-$800/$10	=			425	-	Standard labor hours	)
-80	=			425	-	Standard labor hours
Standard labor hours				425	+	80
Standard labor hours	=			505
Calculation of Standard labor hours per unit:-
a	Standard direct labor-hours for actual production			505	hours
b	Actual production in units			840	units
c	Standard labor hours per unit(a/b)			0.60	hours
Calculation of Standard labor cost per unit:-
a	Standard labor hours per unit(a/b)			0.60	hours
b	Standard direct labor rate per hour			$10.00
c	Standard labor cost per unit(a*b)			$                          6.00

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