Question

Actual Costs and Production Data Standard $2.25 $2.10 Raw materials unit cost Raw materials units 10,600 10,000 Direct labor payroll $120,960 $120,000 Direct labor hours 15,000 14,400 $189,500 Manufacturing overhead incurred $193,500 Manufacturing overhead applied Machine hours expected to be used at normal capacity 42,500 $55,250 Budgeted fixed overhead for June $3.00 Variable overhead rate per machine hour $1.30 Fixed overhead rate per machine hour Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used. Part 1 Compute all of the variances for (1) direct materials and (2) direct labor. (Round per unit values to 2 decimal places, e.g. 52.75 and fin al answers to 0 decimal places, e.g. 52.) (1) Total materials variance $ Materials price variance $ Materials quantity variance (2) Total labor variance $ $ Labor price variance $ Labor quantity variance

Answer 1

(1)
Total materials variance = ( Actual quantity * Actual price ) - ( Standard quantity * Standard price ) = ( 10600 * 2.25 ) - ( 10000 * 2.10 )	2850	Unfavorable
Material price variance = ( Actual price - Standard price ) * Actual quantity = ( 2.25 - 2.10 ) * 10600	1590	Unfavorable
Materials quantity variance = ( Actual quantity - Standard quantity ) * Standard rate = ( 10600 - 10000 ) * 2.10	1260	Unfavorable

(2)
	Actual	Standard
Direct labor payroll	120960	120000
(/) Direct labor hours	14400	15000
Direct labor price per hour	8.40	8.00

Total labor variance = ( Actual hours * Actual price ) - ( Standard hours * Standard price ) = ( 14400 * 8.40 ) - ( 15000 * 8 )	960	Unfavorable
Labor price variance = ( Actual price - Standard price ) * Actual hours = ( 8.40 - 8 ) * 14400	5760	Unfavorable
Labor quantity variance = ( Actual hours - Standard hours ) * Standard price = ( 14400 - 15000 ) * 8	4800	Favorable