Question

6a:

Midgley Corporation makes a product whose direct labor standards are 1.9 hours per unit and $20.00 per hour. In April, the company produced 6,000 units using 10,930 direct labor-hours. The actual direct labor cost was $209,310.

The labor efficiency variance for April is:

$9,400 U

$9,400 F

$9,319 F

$9,428 U

6b:

Midgley Corporation makes a product whose direct labor standards are 0.9 hours per unit and $10.00 per hour. In April, the company produced 5,000 units using 4,260 direct labor-hours. The actual direct labor cost was $41,110.

The labor rate variance for April is:

$1,625 U

$1,490 F

$1,625 F

$1,490 U

6c:

Blaster, Inc., manufactures portable radios. Each radio requires 3 units of Part XBEZ52, which has a standard cost of $1.20 per unit. During May, the company purchased 12,400 units of the part for a total of $15,500. Also during May, the company manufactured 3,000 radios, using 9,900 units of part XBEZ52. The direct materials purchases variance is computed when the materials are purchased.

During May, the materials price variance for part XBEZ52 was:

$470 U

$470 F

$620 F

$620 U

Answer 1

6a)

Standard time = 1.9 hours per unit

Actual output = 6,000 units

Hence, standard time for actual output = 6,000 x 1.9

= 11,400 hours

Direct labor efficiency variance = Standard rate x (Standard time - Actual time)

= 20 x (11,400 - 10,930)

= $9,400 (Favorable)

Correct option is (ii)

6b)

Actual time used = 4,260 hours

Actual cost of labor used = $41,110

Hence, actual rate = Actual cost of labor used/Actual time used

= 41,110/4,260

= $9.65 per hour

Standard rate = $10 per hour

Direct labor rate variance = Actual time x (Standard rate - Actual rate)

= 4,260 x (10 - 9.65)

= $1,491 (favorable)

Correct option is (ii)

6c)

Actual quantity of material purchased = 12,400 units

Actual cost of material purchased = $15,500

Hence, actual price of material = Actual cost of material purchased/Actual quantity of material purchased

= 15,500/12,400

= $1.25 per unit

Standard price = $1.20 per unit

Standard quantity = 3 units

Direct material price variance = Actual quantity x (Standard price - Actual price)

= 12,400 x (1.20 - 1.25)

= $620 (Unfavorable)

Correct option is (iv)