In: Accounting
Lemon Company manufactures a single product. The company
manufactured 5,000 units in March, using 6,150 pounds of material
and 2,420 labor hours. During the same month, they purchased 6,200
pounds of material for $151,590. The actual labor cost for March
was $39,930. There were no beginning or ending work-in-process
inventories. The company has the following unit standard costs for
direct materials and labor.
Budgeted quantity Per unit Budgeted price
Direct materials 1.20 pounds $25 per pound
Direct labor 0.50 hours $15 per hour
1.) The direct material price variance for March is:
2.) The direct material usage variance for March is:
3.)The direct manufacturing labor efficiency variance for March is:
Standard price = $25 per pound
Standard quantity = 1.20 pounds per unit
Actual output = 5,000 units
Standard quantity for Actual output = Standard quantity x Actual output
= 1.20 x 5,000
= 6,000 pounds
Actual quantity = 6,200 pounds
Actual cost of materials = $151,590
Actual price = Actual cost of materials / Actual quantity
= 151,590/6,200
= $24.45
1.
Direct materials price variance = Actual quantity x ( Standard price - Actual price)
= 6,200 x (25-24.45)
= 6,200 x (0.55)
= $3,410 favorable
The direct material price variance for March is= $3,410 favorable
2.
Direct materials usage variance = Standard price x (Standard quantity - Actual quantity)
= 25 x (6,000-6,200)
= 25 x (-200)
= $5,000 unfavorable
The direct material usage variance for March is= $5,000 unfavorable
3.
Standard rate = 15 per hour
Standard time = 0.50 hour per unit
Actual output = 5,000 units
Standard time for Actual output = Standard time x Actual output
= 0.50 x 5,000
= 2,500 hours
Actual time = 2,420 hours
Direct manufacturing labor efficiency variance = Standard rate x ( Standard time - Actual time)
= 15 x (2,500-2,420)
= 15 x (80)
= $1,200 favorable
The direct manufacturing labor efficiency variance for March is = $1,200 favorable
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