Question

Input price and input efficiency variances

The budgeted and actual data for direct materials and labor are as follows:

	Budgeted	Actual
DM price	$3 per pound	$2.75 per pound
DM quantity per unit	3 pounds per unit	4 pounds per unit
DL price	$10 per hour	$13 per hour
DL quantity per unit	0.2 hours per unit	0.3 hours per unit

Actual sales volume is 100 units. Budgeted sales volume is 80 units.

Compute the input price and input efficiency variances for DM and DL.
As a preliminary step, compute actual input quantity (total pounds or hours we actually used) and flexible budget input quantity (total pounds or hours we should have used for actual output):
    actual input quantity for DM = ___________pounds
    flexible budget input quantity for DM = ________ pounds
    actual input quantity for DL = __________ hours
    flexible budget input quantity for DL = __________ hours
Next, compute the variances. Enter favorable variances as a positive number and unfavorable variances as a negative number. Do NOT enter F or U.
    input price variance for DM = $ ___________
    input efficiency variance for DM = $ ____________
    input price variance for DL = $ __________
    input efficiency variance for DL = $ ____________

Answer 1

• All working forms part of the answer
• Workings

Actual DATA for		100	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	400	$              2.750	$             1,100.00
Direct labor	30	$              13.00	$                 390.00

Standard DATA for		100	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 3 pounds x 100 units)=300 pounds	$                   3.00	$             900.00
Direct labor	( 0.2 hrs x 100 units)=20 hrs	$                10.00	$            200.00

• Answers

--Actual input qty for DM = 100 units x 4 pounds = 400 pounds

--Flexible Budget input qty for SM = 100 units x 3 pounds = 300 pounds

--Actual input qty for DL = 100 units x 0.3 hrs = 30 hours

--Flexible budget input qty for DL = 100 units x 0.2 hours = 20 hours

• Variances

--Input Price variances for DM

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        3.00	-	$                       2.75	)	x	400
	100
	Variance		$                  100.00			Favourable-F

--input efficiency variance for DM

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	300	-	400	)	x	$                           3.00
	-300
	Variance		$                  300.00			Unfavourable-U

--Input price variance for DL

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     10.00	-	$                    13.00	)	x	30
	-90
	Variance		$                    90.00			Unfavourable-U

--Input efficiency variance for DL

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	20	-	30	)	x	$                        10.00
	-100
	Variance		$                  100.00			Unfavourable-U