Question

Richins Company produces cranberry juice sold in half-gallon containers. Richins uses a standard costing system and has set the following standards for materials and labor for the juice production:

Direct materials (64 oz. @ $0.03)	$1.92
Direct Labor (0.05 hr. @ $12.00)	0.60
Total prime cost	$2.52

During January, Richins experienced the following actual results:

	a. Units produced: 30,000 half gallons.
	b. Ounces of materials purchased and used: 2,300,000 ounces at $0.025 per ounce.
	c. Labor used: 1,525 hours at $12.25 per hour.

Required:

If required, round your answers to the nearest dollar.

1.	Calculate the total materials variance and label the variance as Favorable or Unfavorable:  $
2.	Calculate the total labor variance and label the variance as Favorable or Unfavorable: $

Refer to the Richins scenario and data to complete the below requirements.

Required:

1.	Calculate the materials price variance and label the variance as Favorable or Unfavorable: $
2.	Calculate the materials usage variance and label the variance as Favorable or Unfavorable: $

Refer to the Richins scenario and data to complete the below requirements.

Required:

If required, round your answers to the nearest dollar.

1.	Calculate the labor rate variance and label the variance as Favorable or Unfavorable: $
2.	Calculate the labor efficiency variance and label the variance as Favorable or Unfavorable: $

Answer 1

1. Computation of total materials variance:

Total materials variance = Standard cost for actual production - Actual Cost

Standard cost for actual production = Standard Direct Material cost per unit*Actual production

Standard cost for actual production = $1.92*30,000 = $57,600

Actual Cost = Direct Material Quanity used * Direct Material cost per unit of direct material

Actual Cost = 2,300,000*$0.025 = $57,500

Total materials variance = $57,600 - $57,500 = $100

As the difference is positive i.e. actual cost is less than the standard cost, hence the variance is favorable.

Therefore,Total materials variance = $100 Favorable

2. Computation of total labor variance:

Total labor variance = Standard cost for actual production - Actual Cost

Standard cost for actual production = Standard labor cost per unit*Actual production

Standard cost for actual production = $0.60*30,000 = $18,000

Actual Cost = Total labor hours used * Direct labor cost per hour

Actual Cost = 1,525*$12.25 = $18,681

Total labor variance = $18,000 - $18,681 = - $681

As the difference is negative i.e. actual cost is more than the standard cost, hence the variance is unfavorable.

Therefore,Total labor variance = $681 Unfavorable

3. Computation of Direct material Price Variance

Direct material Price Variance = (Standard Price-Actual Price)*Actual Quantity purchased

Standard price per ounce	A	$0.03
Actual Price per ounces	B	$0.025
Actual ounces Purchased	C	2,300,000
Direct material Price Variance	(A-B)*C	$11,500	i.e. Favorable

4. Computation of Direct material usage Variance

Direct material Usage Variance = (Standard Quantity for actual production-Actual quantity used)*Standard Price

Standard Material of ounces for actual production	A = 30,000 units*64 Oz	1,920,000
Actual ounces used	B	2,300,000
Standard Price per ounce	C	$0.03
Direct material usage Variance	(A-B)*C	-$11,400	i.e. Unfavorable

5. Computation of Labor Rate Variance

Direct Labor Price Variance = (Standard Rate-Actual Rate)*Actual hours worked

Standard Rate per hour	A	$12.00
Actual Rate per hour	B	$12.25
Actual hours worked	C	1525
Direct Labor Price Variance	(A-B)*C	-$381	i.e. Unfavorable

6. Computation of Labor Efficiency Variance:

Direct labor Efficiency Variance = (Standard hours -Actual hours)*Standard Rate

Standard hours for actual production	A = 30,000 * 0.05 hours per unit	1,500
Actual hours worked	B	1,525
Standard rate per hour	C	$12.00
Direct labor Efficiency Variance	(A-B)*C	-$300	i.e. Unfavorable