Question

ABC bakery makes banana cakes on a standard costing basis. Over the past years, the company has determined a standard materials quantity allowed of 0.75 pound per piece of banana cake at a standard price agreed with suppliers at $1.5 per pound. Historically, the company has been producing 11,000 banana cakes per month. During the just concluded month May 2020, company records show 10,500 banana cakes produced with an actual cost of $13,860 with 8,400 pounds purchased and used in production. Further information reveals that the company has standardized 0.25 hours to finish one unit at a standard rate of $7.00. Time tickets reveal that actual payroll for direct labor amounted to $14,175 with 2,100 hours worked. Required: For the final answers follow instructions. Denote variances with F or U after the answer (Ex. 100F for 100 Favorable; 100U for Unfavorable). Failure to comply with this format will not get any credit. Do not simply write positive or negative answer. 1. Total Materials Variance 2. Total Labor Variance 3. Materials Price Variance 4. Materials Quantity Variance 5. Labor Rate Variance 6. Labor Efficiency Variance 7. Compute the Materials Quantity Variance assuming only 7,500 units were produced with actual usage of 5,500 pounds, the remaining materials were left in ending inventory

Answer 1

1)

Actual material cost		13860
Less:Standard cost of material allowed for actual production	Actual output *Standard quantity allowed per unit *standard rate per pound 10500 * .75 * 1.50 11812.50	(11812.50)
Total material variance		2047.50 U

2)

Actual Labor cost		14175
Less:Standard cost of direct labor allowed for actual production	Actual output *Standard hours allowed per unit *standard rate per hour 10500 * .25*7 18375	(18375)
Total labor variance		-4200 F

3)Material price variance =Actual material cost- [Actual quantity *Standard rate per pound]

                = 13860 - (8400*1.50)

                = 13860 - 12600

               = 1260 U

4)Material quantity variance = SR[AQ-SQ]

             = 1.50 [8400 - (10500 * .75) ]

            = 1.50 [8400 - 7875]

           = 1.50 * 525

          = 787.5 U