Question

In: Accounting

Martinez Fabrics manufactures shirts each of which requires the following:       Direct materials standard               2.5 yards...

Martinez Fabrics manufactures shirts each of which requires the following:

      Direct materials standard               2.5 yards at $8 per yard

      Direct manufacturing labor standard      6 hours at $12

Actual results in the third quarter included production of 2,000 shirts which cost $35,000 and used 4,500 yards of fabric. There were 7,000 actual direct labor hours, with an actual cost of $70,000.

Required:

a.   Compute the direct materials price and efficiency variances for the quarter.

b.   Compute the direct manufacturing labor price and efficiency variances for the quarter.

Solutions

Expert Solution

a.

Standard price = $8 per yard

Standard quantity = $2.5 yards per unit

Actual output = 2,000 units

Actual cost of materials = $35,000

Actual quantity = 4,500 yards

Standard quantity for actual output = Standard quantity x Actual output

= 2.5 x 2,000

= 5,000 yards

Actual price= Actual cost of materials / Actual quantity

= 35,000/4500

= $7.78 per yard

Direct materials price variance = Actual quantity x (Standard price- Actual price)

= 4,500 x (8-7.78)

= 4,500 x (0.22)

= $990 favorable

Direct material efficiency variance = Standard price x (Standard quantity - Actual quantity)

= 8 x (5,000-4,500)

= 8 x 500

= $4,000 favorable

b.

Standard rate = $12 per hour

Standard time = 6 hours per unit

Actual output = 2,000 units

Actual time = 7,000 direct labor hours

Actual cost of labor = $70,000

Standard time for actual output = Standard time x Actual output

= 6 x 2,000

= 12,000 hours

Actual rate = Actual cost of labor/Actual time

= 70,000/7,000

= $10 per hour

Direct labor price variance = Actual time x (Standard rate - Actual rate)

= 7,000 x (12-10)

= 7,000 x 2

= $14,000 favorable

Direct labor efficiency variance = Standard rate x (Standard time- Actual time)

= 12 x (12,000-7,000)

= 12 x 5,000

= $60,000 favorable


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