Question

Cardinal Company has determined the following standard cost data necessary to manufacture one unit of its primary product:

Direct Materials….. (6 pounds @ $20)

Direct Labor…………. .(8 hours @ $15)

During 20X1, Cardinal produced only 1 unit of product. This unit required 7 pounds of direct material (a total of 8 pounds were purchased at a cost of $18 per pound). In addition, total payroll costs for direct labor during 20X1 were $130 (10 hours @ $13 per hour).

Required:

Answer the following questions, indicating BOTH the dollar amount of each variance and whether each variance is FAVORABLE (F) or UNFAVORABLE (U).

The materials price variance was $__
The materials efficiency (usage) variance was $__
The labor rate (price) variance was $__
The labor efficiency (usage) variance was $__

The total cost of the unit completed in 20X1 and transferred from Work in Process to Finished Goods was $

Answer 1

a.)	Material Price Variance:-
	Material price variance= ( Actual Price - Standard price ) x Actual quantity
	= ( 18 - 20 ) x 7
	= - 2 x 7
	= - $ 14 Favorable
b.)	Material efficiency (usage) Variance:-
	Material efficiency variance= ( Actual quantity - Standard quantity ) x Standard price
	= ( 7 - 6 ) x 20
	= 1 x 20
	= $ 20 Unfavorable
c.)	Labour Rate (Price )Variance:-
	Labour rate variance= ( Actual rate - Standard rate ) x Actual hours
	= ( 13 - 15 ) x 10
	= - 2 x 10
	= - $ 20 Favorable
d.)	Labour efficiency (usage) Variance:-
	Labour efficiency variance= ( Actual hours - Standard hours ) x Standard rate
	= ( 10 - 8 ) x 15
	= 2 x 15
	= $ 30 Unfavorable
e)	Total cost of the unit completed in 20X1 and transferred from Work in Process to Finished Goods
	Direct Material cost	126	(7 x 18)
	Direct Labor Cost	130	(10 x 13)
	Total Cost	256