Question

In: Accounting

The Rogers Company uses a standard cost accounting system and estimates production for the year to...

The Rogers Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour.

The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours). Production information for the month of March follows:


Number of units produced		6,000
Materials purchased (18,500 yards)	$	88,800
Materials used in production (yards)		18,500
Direct labor cost incurred ($6.50/hour)	$	75,400

Required:

(Be sure to indicate whether the variances are favorable or unfavorable and show your work.)

Compute the direct material price variance.
Compute the direct material efficiency variance.
Compute the direct labor price (rate) variance.
Compute the direct labor efficiency variance.

Expert Solution

Direct Material Price Variance = Actual Material quantity *( Standard price - Actual price)

Actual Material Quantity = 18500

Standard Price = 13.20 / 3 = 4.40

Actuall price = 88,800 / 18500 = 4.80

Direct Material Price Variance = 18,500 *( 4.40 - 4.80)

= Negative 7,400 = $7,400 (unfavorable)

Direct Material Efficiency Variance = Standard price per unit * (Standard Quanity for actual output - Actual Quantity for actual output)

Standard Quanity for actual output = 6000*3 = 18,000

Actual Quantity for actual output = 18,500

Direct Material Efficiency Variance = 4.40 * ( 18,000 - 18,500)

= 4.40 * -500

= Negative 2,200 = $2,200 (unfavorable)

Actual Hours = 75400 / 6.50 = 11600

Direct labor price (rate) variance = Actual Hours * ( Standard rate - Actual rate)

= 11600 * ( 6.00 - 6.50)

= Negative 5,800 = $5,800(unfavorable)

Standard hours for actual output = 6000 * 2 = 12000 hours

Direct labor efficiency variance = Standard rate per labour hour * (Standard hours for actual output - Actual hours for actual output)

= 6.00 * ( 12000 - 11600)

=6 * 400

= Positive 2,400

= $2,400 (favorable)

ekkarill92 answered 1 year ago

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