Question

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.

Answer 1

Answer:- Material price variance = (Standard price – Actual price) * Actual quantity used

                                      

Silver = ($3.10 per yard - $3.05 per yard )*27000 yards    

                                       = $1350 Favourable

Material Quantity variance = (Standard Quantity- Actual Quantity)*Standard price

                                 Silver =(26250 yards – 27000 yards)*$ 3.10 per yard

                                             = $2325 Unfavourable

Where:-

Standard quantity = Per units required *Actual Production

                    =1.75 yards*15000 pillowcases

                              = 26250 yards

                  

Labor Rate variance = (Standard rate – Actual rate) * Actual hours

                                      

={$5.95 per hour. – ($19140/3300 hours)}*3300 hours    

                                       = $495 Favourable

Labor Efficiency variance = (Standard Hours- Actual hours)*Standard rate per hour

                                           =(3000 hours – 3300 hours)*$ 5.95 per hour

                                             = $1785 Unfavourable

                                

Where:-

Standard Hours = Per hours required *Actual Production

                           =.20 hour per pillowcase*15000 pillowcase

                            =3000 hours