Question

In: Accounting

Sound Sleep Mills uses a standard cost system. During May, Sound Sleep manufactured 15,000 pillowcases, using...

Sound Sleep Mills uses a standard cost system. During May, Sound Sleep manufactured 15,000 pillowcases, using 27,000 yards of fabric costing $3.05 per yard and incurring direct labor costs of $19,140 for 3,300 hours of direct labor. The standard cost per pillowcase assumes 1.75 yards of fabric at $3.10 per yard and 0.20 hours of direct labor at $5.95 per hour.

1. Compute both the price variance and quantity variance relating to direct materials used in the manufacture of pillowcases in May.

2. Compute both the price variance and efficiency variance for direct labor costs incurred in the manufacture of pillowcases in May.

Solutions

Expert Solution

  • All working forms part of the answer
  • Workings

Actual DATA for

15000

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct Material

27000

$              3.050

$           82,350.00

Direct labor

3300

$                5.80

$           19,140.00

Standard DATA for

15000

units

Quantity (SQ)

Rate (SR)

Standard Cost

[A]

[B]

[A x B]

Direct Material

( 1.75 yards x 15000 units)=26250 yards

$                   3.10

$       81,375.00

Direct labor

( 0.2 hours x 15000 units)=3000 hours

$                   5.95

$       17,850.00

  • Requirement 1

Material Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Quantity

(

$                        3.10

-

$                       3.05

)

x

27000

1350

Variance

$              1,350.00

Favourable-F

Material Quantity Variance

(

Standard Quantity

-

Actual Quantity

)

x

Standard Rate

(

26250

-

27000

)

x

$                           3.10

-2325

Variance

$              2,325.00

Unfavourable-U

  • Requirement 2

Labor Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$                        5.95

-

$                       5.80

)

x

3300

495

Variance

$                  495.00

Favourable-F

Labour Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

3000

-

3300

)

x

$                           5.95

-1785

Variance

$              1,785.00

Unfavourable-U

ekkarill92 answered 1 year ago
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