XYZ Company manufactures tables. A standard cost card for the manufacture of one table shows the...

XYZ Company manufactures tables. A standard cost card for the manufacture of one table shows the following:

Standard Cost per Table:

Direct material: 4 sq. ft. @ $3/sq. ft.	$12
Direct labor: 2 hours @ $8/hr	16
Total prime costs	$28

In November, the company produced 1,000 tables. Actual production costs and quantities were:

Direct material: 3,900 sq. ft. @ $3.10/sq. ft.	$12
Direct labor: 2,300 hours @ $7.80/hr	16

Required:

Calculate the price and quantity variances for direct material and direct labor.

Expert Solution

Working

Actual DATA for		1000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	3900	$ 3.10	$ 12,090.00
Direct labor	2300	$ 7.80	$ 17,940.00

Standard DATA for		1000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 4 sq ft x 1000 units)=4000 sq ft	$ 3.00	$ 12,000.00
Direct labor	( 2 hours x 1000 units)=2000 hours	$ 8.00	$ 16,000.00

Answers

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$ 3.00	-	$ 3.10	)	x	3900
	-390
	Variance		$ 390.00			Unfavourable-U

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	4000	-	3900	)	x	$ 3.00
	300
	Variance		$ 300.00			Favourable-F

Labor Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$ 8.00	-	$ 7.80	)	x	2300
	460
	Variance		$ 460.00			Favourable-F

Labour Efficiency Variance or Labor Quantity Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	2000	-	2300	)	x	$ 8.00
	-2400
	Variance		$ 2,400.00			Unfavourable-U

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