Question

The following data for a pottery company pertain to the production of 2,000 clay pots during July.

Direct Materials (all materials purchased were used):

      Standard cost: $6.00 per kilogram of clay

      Total actual cost: $11,200

      Standard cost allowed for units produced was $12,000

      Materials efficiency variance was $240 unfavourable

Direct Manufacturing Labour:

      Standard cost is 2 pots per hour at $24.00 per hour

      Actual cost per hour was $24.50

      Actual labour was 972 hours

a) What is the direct manufacturing labour efficiency variance?

A) $672 unfavourable

B) $500 favourable

C) $672 favourable

D) $500 unfavourable

E) $28 favourable

b). What is the direct manufacturing labour rate variance?

A) $186 favourable

B) $486 unfavourable

C) $486 favourable

D) $672 unfavourable

E) $672 favourable

c What is the direct materials rate variance for the clay pots?

A) $560 unfavourable

B) $560 favourable

C) $800 unfavourable

D) $800 favourable

E) $1,040 favourable

Answer 1

a.
Direct manufacturing labor efficiency variance	(Actual hours - Standard hours)*Standard rate
Direct manufacturing labor efficiency variance	(972-(2000/2))*24
Direct manufacturing labor efficiency variance	(972-1000)*24
Direct manufacturing labor efficiency variance	$672	F
Thus, direct manufacturing labor efficiency variance is $672 favourable
b.
Direct manufacturing labor rate variance	(Actual rate - Standard rate)*Actual labour hours
Direct manufacturing labor rate variance	(24.50-24)*972
Direct manufacturing labor rate variance	$486	U
Thus, direct manufacturing labor rate variance is $486 unfavourable
c.
Direct material rate variance	Total costs variance + Material efficiency variance
Direct material rate variance	(11200-12000) + $240 U
Direct material rate variance	800 F + 240 U
Direct material rate variance	$1,040	F
Thus, direct material rate variance is $1,040 favourable