Question

Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product.

Direct materials (8 pounds at $2.50 per pound)	$20
Direct labor (3 hours at $12.00 per hour)	$36

During the month of April, the company manufactures 230 units and incurs the following actual costs.

Direct materials purchased and used (1,900 pounds)	$5,035
Direct labor (700 hours)	$8,120

Instructions

Compute the total, price, and quantity variances for materials and labor.

Answer 1

Direct material Varainces

Direct material Price Variance=(Standard price/Qty.-Actual price/qty.)*Actual qty. used

ie. (2.50-(5035/1900))*1900=

-285

U

Direct material Quantity Variance=(Standard Qty.allowed for actual production-Actual qty. used)*Std. price/ qty.

ie.((230*8)-1900)*2.50=

-150

U

Total Direct material Cost variance=(Std. qty. allowed fro actual prodn.*Std. Price/qty.)-(Actual qty. used*Actual price/qty.)

ie.(230*8*2.50)-5035=

-435

U

ie. Total D/M Cost variance=DMPV+DMQV

ie. 435 U= 285U+150 U

Direct Labor Variances

Direct Labor Price Variance=(Standard Rate/DLhr-Actual rate/DLhr)*Actual DL hrs.

ie.(12-(8120/700))*700=

280

F

Direct Labor Efficiency/ Quantity Variance=(Standard DL hrs.allowed for actual production-Actual DL hrs. used)*Std.rate/DLhr.

ie.((230*3)-700)*12=

-120

U

Total Direct Labor Cost variance=(Std. DLhrs. allowed fro actual prodn.*Std. rate/DLhr)-(Actual DL hrs. used*Actual rate/DL hr.)

ie.(230*3*12)-8120=

160

F

ie. Total D/L Cost variance=DLPV+DLQV

ie. 160 F= 280 F+120 U