Question

In: Accounting

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows: Actual...

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows:

Actual purchase price $ 3.20 per lb.
Actual direct labor rate $ 8.40 per hour
Standard purchase price $ 3.00 per lb.
Standard quantity for sets produced 1,060,000 lbs.
Standard direct labor hours allowed 21,000
Actual quantity purchased in October 1,365,000 lbs.
Actual direct labor hours 19,000
Actual quantity used in October 1,090,000 lbs.
Direct labor rate variance $6,460 F

Required:

1. Calculate the total cost of purchases for October.

2. Compute the direct materials price variance based on quantity purchased.

3. Calculate the direct materials quantity variance based on quantity used.

4. Compute the standard direct labor rate for October.

5. Compute the direct labor efficiency variance for October.

Solutions

Expert Solution

Ans. 1 Total cost of purchase = Actual purchase price * Actual quantity purchased
$3.20 * 1,365,000
$4,368,000
Ans. 2 Materials price variance = (Standard price * Actual quantity) - Actual cost of purchase
($3 * 1,365,000) - $4,368,000
$4,095,000 - $4,368,000
-$273,000 (or $273,000 unfavorable)
Ans. 3 Materials usage variance = (Standard quantity - Actual quantity used) * Standard price
(1,060,000 - 1,090,000) * $3
-30,000 * $3
-$90,000 (or $90,000 unfavorable)
Ans. 4 Direct labor rate variance = (Standard rate   - Actual rate) * Actual hours
$6,460 = (standard labor rate - $8.40) * 19,000
$6,460 / 19,000 = Standard labor rate - $8.40
$0.34    = Standard labor rate - $8.40
Standard labor rate = $8.40 + $0.34
$8.74 per hour
Ans. 5 Direct labor efficiency variance = (Standard hours - Actual hours) * Standard rate
(21,000 - 19,000) * $8.74
2,000 * $8.74
$17,480 favorable

ekkarill92 answered 2 years ago
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