Question

Amber Company produces iron table and chair sets. During October, Amber's costs were as follows: $ 2.10 per lb $7.30 per hour $1.90 per lb. 950,000 lbs. 15,000 1,095,000 lbs 10,000 980.000 lbs. $5,300 F Actual purchase price Actual direct labor rate Standard purchase price Standard quantity for sets produced Standard direct labor hours allowed Actual quantity purchased in October Actual direct labor hours Actual quantity used in October Direct labor rate variance Required: 1. Calculate the total cost of purchases for October Total Purchases 2. Compute the direct materials price variance based on quantity purchased. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.) Direct Materials Price Variance

Answer 1

1.) Total purchases = Actual purchase price x actual quantity purchased

= $2.10 x 1,095,000 = $2,299,500

2.) Direct Material price variance

= (Std price - actual price) x Actual quantity purchased

= (1.90 - 2.10) x 1,095,000

= $219,000 U

3.) Direct Material quantity variance

= (Std quantity - actual quantity used) x Std rate

= (950,000 - 980,000) x 1.90

= $57,000 U

4.) Standard direct labor rate :-

Labor rate variance = (std rate - actual rate) x actual hours

5,300 F = (Std rate - 7.30) x 10,000

Standard rate = $7.83

5.) Direct Labor efficiency variance

= (Standard hours - actual hours) x standard rate

= (15,000 - 10,000) x 7.83

= $39,150 F