Question

Exercise 11-5 The standard cost of Product B manufactured by Pharrell Company includes 2.6 units of direct materials at $6.0 per unit. During June, 26,700 units of direct materials are purchased at a cost of $5.90 per unit, and 26,700 units of direct materials are used to produce 10,100 units of Product B. (a) Compute the total materials variance and the price and quantity variances. Total materials variance $ Materials price variance $ Materials quantity variance $ (b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $6.05 and the quantity purchased and used is 26,500 units. Total materials variance $ Materials price variance $ Materials quantity variance $

Exercise 11-6 Lewis Company’s standard labor cost of producing one unit of Product DD is 3.0 hours at the rate of $12.6 per hour. During August, 40,500 hours of labor are incurred at a cost of $12.75 per hour to produce 13,300 units of Product DD. (a) Compute the total labor variance. Total labor variance $ (b) Compute the labor price and quantity variances. Labor price variance $ Labor quantity variance $ (c) Compute the labor price and quantity variances, assuming the standard is 3.2 hours of direct labor at $12.85 per hour. Labor price variance $ Labor quantity variance $

Answer 1

• All working forms part of the answer
• Exercise 11 – 5

Part ‘a’

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        6.00	-	$                       5.90	)	x	26700
	2670
	Variance		$              2,670.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	26260	-	26700	)	x	$                           6.00
	-2640
	Variance		$              2,640.00			Unfavourable-U

----Part ‘b’

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        6.00	-	$                       6.05	)	x	26500
	-1325
	Variance		$              1,325.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	26260	-	26500	)	x	$                           6.00
	-1440
	Variance		$              1,440.00			Unfavourable-U

• Exercise 11 – 6

---Part ‘a’: Total Labor Variance

Total Labor Variance
(	Standard Cost	-	Actual Cost	)
(	$           502,740.00	-	$          516,375.00	)
	-13635
	Variance		$            13,635.00			Unfavourable-U

---Part ‘b’

Labor Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     12.60	-	$                    12.75	)	x	40500
	-6075
	Variance		$              6,075.00			Unfavourable-U
Labour Quantity Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	39900	-	40500	)	x	$                        12.60
	-7560
	Variance		$              7,560.00			Unfavourable-U

---Part ‘c’

Labor Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     12.85	-	$                    12.75	)	x	40500
	4050
	Variance		$              4,050.00			Favourable-F
Labour Quantity Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	42560	-	40500	)	x	$                        12.85
	26471
	Variance		$            26,471.00			Favourable-F