Question

New Jersey Valve Company manufactured 7,600 units during January of a control valve used by milk processors in its Camden plant. Records indicated the following: Direct labor Direct material purchased Direct material used 46,800 hr. at $15.20 per hr. 29,000 lb. at $2.40 per lb 28,300 lb The control valve has the following standard prime costs: Direct material Direct labor 4 lb. at $2.30 per lb. 6 hr. at $15.60 per hr $ 9.20 93,60 $102.80 Standard prime cost per unit Required: 1. Prepare a schedule of standard production costs for January, based on actual production of 7,600 units. 2. For the month of January, compute the following variances. Complete this question by entering your answers in the tabs below. Required 1 Required 2 For the month of January, compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).) a. Direct-material price variance b. Direct-material quantity variance c. Direct-material purchase price variance d. Direct-labor rate variance e. Direct-labor efficiency variance <Required 1 Required 2>

Answer 1

Solution

Material Price Variance	$           2,830.00	Unfavourable-U
Material quantity variance	$           4,830.00	Favourable-F
Material Purchase price Variance	$ 2,900.00	Unfavourable-U
Labor rate variance	$         18,720.00	Favourable-F
Labor Efficiency variance	$         18,720.00	Unfavourable-U

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    2.30	-	$                     2.40	)	x	29000
	-2900
	Variance		$             2,900.00			Unfavourable-U

.

Standard DATA for		7600	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 4 lbs x 7600 Units)=30400 lbs	$              2.30	$            69,920.00
Direct labor	( 6 Hour x 7600 Units)=45600 Hour	$           15.60	$          711,360.00

.

		7600	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	28300	$       2.40	$          67,920.00
Direct labor	46800	$     15.20	$       711,360.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    2.30	-	$                     2.40	)	x	28300
	-2830
	Variance		$             2,830.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	30400	-	28300	)	x	$              2.30
	4830
	Variance		$             4,830.00			Favourable-F

.

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  15.60	-	$                   15.20	)	x	46800
	18720
	Variance		$           18,720.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	45600	-	46800	)	x	$           15.60
	-18720
	Variance		$           18,720.00			Unfavourable-U