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.

Calculation of materials and labor variances

Petersen Corp. manufactures and sells a single product. The company uses a standard cost system. The standard cost per unit of product follows:

The Purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 lb were purchased at a price of $2.90 per pound.

Required:

Calculate the following variances from standard costs for the data given, using the formulas on pages 402 and 403:

1. Materials quantity.

2. Materials purchase price (at time of purchase).

3. Labor efficiency.

4. Labor rate.

Reference:

• The materials quantity (usage) variance represents the actual quantity of direct materials used above or below the standard quantity allowed for the actual level of production, at standard price.LO3