ABC manufactures a product with the following: Direct materials standard 5 units at $4 per unit...
ABC manufactures a product with the following:
Direct materials standard 5 units at $4 per unit
Direct manufacturing labor standard 15 hours at $20 per hour
During the second quarter, the company made 3,000 products and used 22,000 units of raw material costing $90,200. Direct labor totaled 70,000 hours for $1,365,000.
Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.
Homework Answers
(a) Direct Material Price Variance = (Std Rate – Actual Rate) * Actual Quantity
Std Rate = $4 per unit
Actual rate = 90200/22000 = $ 4.1 per unit
Actual Qty = 22000 units
(4 – 4.1) * 22000 = 2200(U)
Direct Material Efficiency Variance = (Std Qty – Actual Qty) * Std Rate
Std Qty = 3000 * 5 = 15000 units
=(15000 – 22000) * 4 = 28000(U)
Direct Manufacturing Labour Price Variance = (Std Rate – Actual Rate) * Actual Hrs
Std Rate = $20 per hr
Actual rate = 1365000/70000 = $19.5 per hr
Actual Hrs = 70000 hrs
=(20 – 19.5) * 70000 = 35000(F)
Direct Manufacturing Labour Efficiency Variance = (Std Hrs – Actual Hrs) * Std Rate
Std Hrs = 3000 * 15 = 45000 hrs
(45000 – 70000) * 20 = 500000(U)
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