Question

Computation of Variable Cost Variances The following information pertains to the standard costs and actual activity for Tyler Company for September: Standard cost per unit Direct materials 4 units of material A x $2.00 unit per 1 unit of material B x $3.00 per unit Direct labor 3 hours x $8.00 per hour Activity for September Materials purchased Material A 4,100 units x $2.05 per unit Material B 1,000 units x $3.10 per unit Materials used Material A 3,750 units Material B 905 units Direct labor used 2,690 hours x $8.10 per hour Production output 900 units There were no beginning direct materials inventories. (a) Determine the materials price and quantity variances. Material A Material B Materials price variance Materials quantity variance 172.5 x U 500 x U 90.5 x U 315 x U (b) Determine the labor rate and efficiency variances. Labor rate variance $ 476 x U Labor efficiency variance 160 x F

Answer 1

ANSWER

• All working forms part of the answer
• Requirement ‘a’

---Material ‘A’ Variances:

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity used
(	$                        2.00	-	$                       2.05	)	x	3750
	-187.5
	Variance		$                  187.50 [Comment if this answer is NOT correct and I’ll help you out, as this variance is calculated on quantity used NOT on quantity purchased]			Unfavourable-U
Material Quantity Variance
(	Standard Quantity = 900 units x 4 units of A	-	Actual Quantity used	)	x	Standard Rate
(	3600	-	3750	)	x	$                           2.00
	-300
	Variance		$                  300.00			Unfavourable-U

---Material ‘B’ Variances

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        3.00	-	$                       3.10	)	x	905
	-90.5
	Variance		$                    90.50 [Comment if this answer is NOT correct and I’ll help you out, as this variance is calculated on quantity used NOT on quantity purchased]			Unfavourable-U
Material Quantity Variance
(	Standard Quantity [900 units x 1 unit of B]	-	Actual Quantity used	)	x	Standard Rate
(	900	-	905	)	x	$                           3.00
	-15
	Variance		$                    15.00			Unfavourable-U

• Requirement ‘b’

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        8.00	-	$                       8.10	)	x	2690
	-269
	Variance		$                  269.00			Unfavourable-U

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2700	-	2690	)	x	$                           8.00
	80
	Variance		$                    80.00			Favourable-

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