Question

Material and Labor Variances
The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product:

		Actual Costs				Standard Costs
Direct material		4,200	lbs. @	$4.90		4,000	lbs. @	$5.20
Direct labor		5,700	hrs. @	$9.30		6,000	hrs. @	$9.50

Determine the following variances:

Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.

Materials Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
a. Materials price	Answer	AnswerFU
b. Materials efficiency	Answer	AnswerFU

Labor Variances
Actual cost:	Answer
Split cost:	Answer
Standard cost:	Answer
c. Labor rate	Answer	AnswerFU
d. Labor efficieny	Answer	AnswerFU

Answer 1

Material Variances

Actual Cost = Actual quantity × Actual Rate
= 4200lbs × $4.90
= $ 20,580

Standard Cost = Standard quantity × Standard Rate
= 4000lbs × $5.20
= $ 20,800

Split Cost = Standard Cost - Actual Cost
= $ 20,800 - $ 20,580
= $ 220 F

a. Material Price Variance =

= Actual Quantity × ( Standard Price - Actual Price)
= 4200 (5.20 - 4.90)
= 4200 × 0.3
= $ 1260 F

b. Material Efficiency Variance

= Standard Rate × ( Actual Quantity - Standard Quantity)
= 5.20 (4200-4000)
= 5.20 × 200
=$ 1040 F

Labour Variances

Actual Cost = Actual hours × Axtual Rate
= 5700hrs × $ 9.30
= $53,010

Standard Cost = Standard Hours × Standard Rate
= 6000hrs × $ 9.50
= $57,000

Split Cost = Standard Cost - Actual Cost
= 57,000 - 53,010
= $ 3990 F

c. Labour Rate Variance

= Actual hours worked × (Actual Rate - Standard Rate)
= 5700 ( 9.30 - 9.50 )
= 5700 × (-0.20)
= $ 1,140 U

d. Labour Efficiency Variance

= (Actual Hours × Standard Rate) - (Standard Hours × Standard Rate)
= (5700×9.50) - (6000×9.50)
= 54,150 - 57,000
= $ 2,850 U