Question

Question 2 – Chap. 10

Material and Labor Variances
The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product:

		Actual Costs				Standard Costs
Direct material		17,550	lbs. @	$5.30		18000	lbs. @	$5.10
Direct labor		27,900	hrs. @	$8.40		27,000	hrs. @	$8.70

Determine the following variances:

Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.

Materials Variances
Actual cost:
Split cost:
Standard cost:
a. Materials price
b. Materials efficiency

Labor Variances
Actual cost:
Split cost:
Standard cost:
c. Labor rate
d. Labor efficieny

Answer 1

• All working forms part of the answer

Working	Materials Variances
A = AQ x AR	Actual Cost	$           93,015.00	[17550 lbs x $ 5.30]
B = AQ x SR	Split Cost	$           89,505.00	[17550 lbs x $ 5.10]
C = SQ x SR	Standard Cost	$           91,800.00	[18000 lbs x $ 5.1]
D = A - B	Material Price Variance	$             3,510.00	Unfavourable
E = C - B	Material Efficiency	$             2,295.00	Favourable

Working	Labor Variance
A = AQ x AR	Actual Cost	$        234,360.00	[27900 hrs x $ 8.40]
B = AQ x SR	Split Cost	$        242,730.00	[27900 hrs x $ 8.70]
C = SQ x SR	Standard Cost	$        234,900.00	[27000 hrs x $ 8.70]
D = A - B	Labor Rate	$             8,370.00	Favourable
E = C - B	Labor Efficiency	$            7,830.00	Unfavourable