Question

The following direct materials and direct labor data pertain to the operations of Laurel Company for the month of August.

Costs
Actual labor rate		$13	per hour
Actual materials price		$120	per ton
Standard labor rate		$12.50	per hour
Standard materials price		$124	per ton

Quantities
Actual hours incurred and used		4,900 hours
Actual quantity of materials purchased and used		2,000 tons
Standard hours used		4,960 hours
Standard quantity of materials used		1,990 tons

(a)

Compute the total, price, and quantity variances for materials and labor.

Total materials variance		$		Neither favorable nor unfavorableUnfavorableFavorable
Materials price variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Materials quantity variance		$		UnfavorableNeither favorable nor unfavorableFavorable
Total labor variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Labor price variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Labor quantity variance		$		Neither favorable nor unfavorableUnfavorableFavorable

Answer 1

Total material variance	Actual material costs - Budgeted material costs
Total material variance	(120*2000)-(124*1990)
Total material variance	240000-246760
Total material variance	$6,760	F
Using the materials quantity variance we can calculate the quantity of material actually used from which actual cost can be derived
Material price variance	(AR-SR)*AQ
Material price variance	(120-124)*2000
Material price variance	$8,000	F
Material quantity variance	(AQ-SQ)*SR
Material quantity variance	(2000-1990)*124
Material quantity variance	10*124
Material quantity variance	$1,240	U
Total labor variance	Actual labor costs - Budgeted labor costs
Total labor variance	(13*4900)-(12.50*4960)
Total labor variance	$1,700	U
Labor price variance	(AR-SR)*AH
AR is actual rate, SR is standard rate and AH is actual hour
Labor price variance	(13-12.50)*4900
Labor price variance	$2,450	U
Labor quantity variance	(AQ-SQ)*SR
Labor quantity variance	(4900-4960)*12.50
Labor quantity variance	$750	F