In all problems involving variances, use “F” and “U” to indicate favorable and unfavorab...

In all problems involving variances, use “F” and “U” to indicate favorable and unfavorable variances, respectively.

Materials and labor variance analyses (similar to Self-Study Problem 1)

The standard cost summary for the most popular product of Fantastic-Four Products Co. is shown as follows, together with production and cost data for the period.

One gallon each of liquid lead and varnish are added at the start of processing. The balance of the materials is added when the process is two-thirds complete. Labor and overhead are added evenly throughout the process.

Required:

1. Calculate equivalent production. (Be sure to refer to the standard cost summary to help determine the percentage of materials in ending work in process.)

2. Calculate materials and labor variances and indicate whether they are favorable or unfavorable, using the diagram format shown in Figure 8-4.

3. Determine the cost of materials and labor in the work in process account at the end of the month.

4. Prove that all materials and labor costs have been accounted for. (Hint: Don’t forget the net variances in reconciling the costs accounted for with the costs to be accounted for.)

Reference: Figure 8-4

Reference:

Materials and Labor Variance Analyses

Chico Chemical Co.

Chico Chemical Co. manufactures one product and uses a standard cost system. The established standards for materials and labor follow:

Material A: 3 lb @ $6 per lb. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18

Labor: 4 hr @ $7.50 per hr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60

The operating data for the month of May follow:

Work in process, May 1: 200 units, all materials, 20% complete as to labor.

Work in process, May 31: 600 units, all materials, 80% complete as to labor.

Completed during the month: 6,400 units.

All materials are added at the beginning of processing in the department.

20,900 pounds of materials were used in production during the month, at a total cost of $123,310. Direct labor amounted to $208,670, which was at a rate of $7.70 per hour.

Required:

Using the FIFO method of costing, calculate the following variances:

1. Materials quantity variance.

2. Materials price variance.

3. Labor efficiency variance.

4. Labor rate variance.