Question

Required information

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A manufactured product has the following information for June.

	Standard	Actual
Direct materials	6 lbs. @ $7 per lb.		43,700	lbs. @ $7.10 per lb.
Direct labor	3 hrs. @ $16 per hr.		21,200	hrs. @ $16.50 per hr.
Overhead	3 hrs. @ $13 per hr.	$	285,800
Units manufactured			7,200

Compute the direct materials price variance and the direct materials quantity variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Cost per unit" answers to 2 decimal places.)

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

	Actual Cost Standard Cost

Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Rate per hour" answers to 2 decimal places.)

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

	Actual Cost Standard Cost $0 0 $0 $0 0

Answer 1

(A)

Material price variance = actual quantity purchased x (standard price - actual price)

= 43700 x ($7 - $7.10)

= $4370 Unfavorable

(B)

Material quantity variance = standard price x (standard quantity - actual quantity used)

= $7 x (43200 - 43700)

= $3500 Unfavorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 7200 x 6 = 43200 lbs

———————————————————

(A)

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

= 21200 x ($16 - $16.50)

= $10600 Unfavorable

(B)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $16 x (21600 - 21200)

= $6400 Favorable

Where,

Standard hours = actual output x standard hours per unit of output

= 7200 x 3 = 21600 hours