Question

Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor: Quantity, 0.20 hour Rate, $10.00 per hour Direct Material: Quantity, 5 kilograms Price, $0.50 per kilogram Actual material purchases amounted to 210,000 kilograms at $0.57 per kilogram. Actual costs incurred in the production of 30,000 units were as follows: Direct labor: Direct material: $ 72,450 for 6,900 hours $94,875 for 165,000 kilograms Required: Fill in the amounts in the tables below.

Answer 1

Solution:

Direct Material Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AQ *	AP =				AQ *	SP =				SQ *	SP =
165000	$0.575	$94,875.00			165000	$0.50	$82,500.00			150000	$0.50	$75,000.00
			$12,375.00	U				$7,500.00	U
			Direct Material Price Variance					Direct Material Qty variance
Direct material price variance					$12,375.00	U
Direct material quantity variance					$7,500.00	U
Direct material cost variance					$19,875.00	U

Direct Material Purchase Price Variance
Actual Cost					Standard cost for actual quantity
AQ *	AP =				AQ *	SP =
210000	$0.575	$120,750.00			210000	$0.50	$105,000.00
			$15,750.00	U
			Direct Material Purchase Price Variance

Direct Labor Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
6900	$10.50	$72,450.00			6900	$10.00	$69,000.00			6000	$10.00	$60,000.00
			$3,450.00	U				$9,000.00	U
			Direct Labor rate Variance					Direct Labor Efficiency Variance
Direct Labor Rate variance					$3,450.00	U
Direct Labor Efficiency variance					$9,000.00	U
Direct labor cost variance					$12,450.00	U