Question

Direct Materials Variances

Bellingham Company produces a product that requires 14 standard pounds per unit. The standard price is $8.5 per pound. If 4,200 units required 57,000 pounds, which were purchased at $8.76 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct materials price variance	$
b. Direct materials quantity variance	$
c. Total direct materials cost variance	$

Direct Labor Variances

Bellingham Company produces a product that requires 7 standard hours per unit at a standard hourly rate of $22.00 per hour. If 2,600 units required 18,600 hours at an hourly rate of $21.56 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) total direct labor cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct labor rate variance	$
b. Direct labor time variance	$
c. Total direct labor cost variance	$

Answer 1

Answer 1: (All amounts are in $)

Material Price Variance = (Standard Price-Actual price)*Actual Quantity

Material Price Variance = (8.5-8.76)*57,000

Material Price Variance = $ -14,820, or $ 14,820 U

Material Quantity Variance = (Standard quantity-Actual Quantity)*Standard Price

Material Quantity Variance = (58,800-57,000)*8.5

Material Quantity Variance = 15,300, or $ 15300 F

Material Cost Variance = Material Price Variance+Material Quantity Variance

Material Cost Variance = $ -14,820 + $ 15,300

Material Cost Variance = $ 480, or $ 480 F

Answer 2:

Labor rate Variance = (Standard rate-Actual rate)*Actual hours

Labor rate Variance = (22-21.56)*18,600

Labor rate Variance = 8,184, or $ 8,184 F

Labor hour Variance = (Standard hours-Actual hours)*Standard rate

Labor hour Variance = (18,200-18,600)*22

Labor hour Variance = -8,800, or $ 8,800 U

Labor Cost Variance = Labor rate Variance+Labor hour Variance

Labor Cost Variance = 8,184 + $ -8,800

Labor Cost Variance = $ -616, or $ 616 U

In case of any doubt, please comment.