Question

The following data is given for the XYZ Company:

      Budgeted production                                                          26,000 units

      Actual production                                                               27,500 units

      Materials:                                                                          

       Standard price per ounce                                                 $6.50

       Standard ounces per completed unit                                 8

       Actual ounces purchased and used in production              228,000

       Actual price paid for materials                                          $1,504,800

      Labor:                                                                                

       Standard hourly labor rate                                                $22 per hour

       Standard hours allowed per completed unit                      6.6

       Actual labor hours worked                                                183,000

       Actual total labor costs                                                     $4,016,850

Required:

a.   Calculate the materials variances and indicate whether they are favorable or unfavorable

b.         Calculate the labor variances and indicate whether they are favorable or unfavorable

Answer 1

			Budgeted	Standard	Actual
			Quantity/Hrs	Rate	Amount	Quantity/Hrs	Rate	Amount	Quantity/Hrs	Rate	Amount
		Material	8	6.5	52	220000	6.5	1430000	228000	6.6	1504800
		Labour	6.6	22	145.2	181500	22	3993000	183000	21.95	4016850
a)		Material cos variance = Standard material cost - actual material cost
		=1430000 - 1504800
		74,800	Unfavorable
		Material Price Variance = (Standard Price - Actual Price ) Actual Quantity Purchased
		= (6.5 - 6.6 ) *228000
		22,800	Unfavorable
		Material Quantity Variance = (Standard quantity - Actual Quantity ) Standard Price
		= (220000 -228000 )*6.5
		52,000	Unfavorable
b)		Labor cost variance = standard labor cost - actual labor cost
		=3993000 - 4016850
		23,850	Unfavorable
		Labour Rate Variance = (Standard Rate - Actual Rate) Actual Hrs Worked
		= (22 - 21.95)* 183000
		9,150	Favorable
		Labour Efficiency Variance = (Standard Hrs. - Actual Hrs) Standard Rate
		= (181500 - 183000 )*22
		33,000	Unfavorable