Question

CHAPTER 10: See information in Textbook for Exercise 10-50. I need to change two numbers. Change the number of units produced to be 410,000 and the number of pounds of materials purchased to be 2,075,000 instead of the quantities given for these in the exercise.

10-50

At the beginning of the year, Crag Company had the following standard cost sheet for one of its plastic products.

                                    Direct materials ( 5 lbs @ 54.00)             $20.00

                                     Direct Labor ( 2 hours @ 15.00)                30.00

                                      Standard prime cost per unit                       50.00

the actual results for the year are as follows:

a. Units produced: 400,000

b. Materials purchased: 2,060,000 pounds @ 3.95

c. Materials used: 2,100,000 pounds

d. Direct labor: 825,000 hours @ 14.85

1. Compared price and usage variances for materials.

2. Compute labor rate efficiency variances, using both the formula and columnar approaches.

Answer 1

Using Revised Figures

1.
Price Variance = (Actual Price - Standard Price) x Actual Quantity
= ($3.95 - 4) x 2075000 = $103750 (F)

Usage Variance = (Actual Quantity used - Standard Quantity) x Standard Price
= (2100000 - 410000 x 5) x $4 = $200000 (U)

2.
Labor Rate Variance = (Actual Rate - Standard Rate) x Actual hours
= ($14.85 - 15) x 825000 = $123750 (F)

Labor Efficiency Variance = (Actual hours - Standard Hours) x Standard Rate
= (825000 - 410000 x 2) x $15 = $75000 (U)

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
825000		$           14.85		825000		$         15.00		820000		$          15.00
			$ 12,251,250				$ 12,375,000				$ 12,300,000
Direct Labor rate Variance				$       (123,750)	Favorable
Direct Labor Efficiency Variance				$           75,000	Unfavorable
Total Labor Variance				$         (48,750)	Unfavorable