Question

Bob’s TV Company budgeted the following cost standards for the current year:

Direct materials = 1.40 pounds per unit @ $1.50 per pound

Direct labor = 0.75 hours per unit @ $6 per hour

Actual production and costs were as follows:

Units produced = 2,800

Direct materials used = 4,500 lbs.

Direct materials purchased = 5,000 lbs. @ a cost of $5,850

Direct labor incurred = 2,000 hours at a cost of $13,000

a)  The material price variance for materials purchased was?

b)  The material efficiency (usage) variance was?

c)  The labor price variance was

d)  The labor efficiency (usage) variance was

Answer 1

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Standard Material Price		$                   1.50
Standard Quantity	2,800*1.40	3,920
Actual Quantity Purchased		5,000
Actual Quantity used		4,500
Actual Matrial Price	$5,850/5,000	$                   1.17
Material Price Variance	AQ(AP-SP)
	(Actual Price	-	Standard Price)	*	Actual Quantity
	$                                      1.17	-	$                       1.50	*	5000
	$                                    1,650	Favorable
Material Quantity Variance	SP(AQ-SQ)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	4,500	-	3,920	*	$                       1.50
	$                                  870.00	Unfavorable
Standard Hour Rate		$                   6.00
Standard Hour	2,800*0.75	2,100
Actual Hours		2,000
Actual Hour Rate	$13,000/2,000	$                   6.50
Labor Rate Variance	AH(AR-SR)
	(Actual Rate	-	Standard Rate)	*	Actual Hours
	$                                      6.50	-	$                       6.00	*	2000
	$                                    1,000	Unfavorable
Labor Efficiency Variance	SR(AH-SH)
	(Actual Quantity	-	Standard Qty)	*	Standard Price
	2,000	-	2,100	*	$                       6.00
	$                                        600	Favorable