Question

The Comet Company's budget contains these standards for materials and direct labor for a unit: Material 5 lbs. @ $1 per lb. = $5

Labor 2 hrs. @ $5 per hr. = $10

Although 2,500 units were budgeted, 3,000 were actually produced. Materials weighing 16,000 lbs. were purchased for $18,400. Materials weighing 15,500 lbs. were issued to production. Direct Labor costs were $33,075 for 6,750 hrs.

A.) What's the materials price variance?

B.) What's the materials quantity variance?

C.) What's the total material variance?

D.) What's the labor rate variance?

E.) What's the labor efficiency variance?

F.) What was the total labor variance?

Thanks! :)

Answer 1

Material Price Variance	$        2,325.00	Unfavourable-U
Material quantity variance	$           500.00	Unfavourable-U
Total Material Variance	$        2,825.00	Unfavourable-U
Labor rate variance	$           675.00	Favourable-F
Labor Efficiency variance	$        3,750.00	Unfavourable-U
Total Labor variance	$        3,075.00	Unfavourable-U

Material variance alternate solution taking total material purchase instead of material used.

Material Price Variance

$        2,400.00

Unfavourable-U

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.00	-	$                     1.15	)	x	15500
	-2325
	Variance		$             2,325.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	15000	-	15500	)	x	$       1.00
	-500
	Variance		$                 500.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         15,000.00	-	$           17,825.00	)
	-2825
	Variance		$             2,825.00			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    5.00	-	$                     4.90	)	x	6750
	675
	Variance		$                 675.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	6000	-	6750	)	x	$       5.00
	-3750
	Variance		$             3,750.00			Unfavourable-U
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         30,000.00	-	$           33,075.00	)
	-3075
	Variance		$             3,075.00			Unfavourable-U

Standard DATA for		3000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 5 lbs x 3000 Units)=15000 lbs	$                  1.00	$        15,000.00
Direct labor	( 2 hr x 3000 Units)=6000 hr	$                  5.00	$        30,000.00

Actual DATA for		3000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	15500	$            1.15	$      17,825.00
Direct labor	6750	$            4.90	$      33,075.00

Alternate solution workinh

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.00	-	$                     1.15	)	x	16000
	-2400
	Variance		$             2,400.00			Unfavourable-U