Question

In: Accounting

Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 pillowcases, using 27,900 yards...

Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 pillowcases, using 27,900 yards of fabric costing $3.05 per yard and incurring direct labor costs of $17,496 for 3,240 hours of direct labor. The standard cost per pillowcase assumes 1.75 yards of fabric at $3.10 per yard, and 0.20 hours of direct labor at $5.95 per hour.

a. Compute both the price variance and quantity variance relating to direct materials used in the manufacture of pillowcases in May.

b. Compute both the rate variance and efficiency variance for direct labor costs incurred in manufacturing pillowcases in May.

(For all requirements, Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)

a. Materials price variance     1395.00    Favorable

Materials quantity variance    _______     Unfavorable

b. Labor rate variance           ________ Favorable

Labor efficiency variance      ________ Unfavorable

Solutions

Expert Solution

  • Workings

Actual DATA for

15000

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct Material

27900

$                   3.05

$           85,095.00

Direct labor

3240

$                   5.40

$           17,496.00

Standard DATA for

15000

units

Quantity (SQ)

Rate (SR)

Standard Cost

[A]

[B]

[A x B]

Direct Material

( 1.75 lbs x 15000 units)=26250 lbs

$                   3.10

$       81,375.00

Direct labor

( 0.2 hours x 15000 units)=3000 hours

$                   5.95

$       17,850.00

  • Requirement [a]

Material Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Quantity

(

$                        3.10

-

$                       3.05

)

x

27900

1395

Variance

$              1,395.00

Favourable-F

Material Quantity Variance

(

Standard Quantity

-

Actual Quantity

)

x

Standard Rate

(

26250

-

27900

)

x

$                           3.10

-5115

Variance

$              5,115.00

Unfavourable-U

  • Requirement [b]

Labor Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$                        5.95

-

$                       5.40

)

x

3240

1782

Variance

$              1,782.00

Favourable-F

Labour Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

3000

-

3240

)

x

$                           5.95

-1428

Variance

$              1,428.00

Unfavourable-U

ekkarill92 answered 3 hours ago
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