Question

Compute cost variances

All Star Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 141,000 square feet of extruded vinyl purchased at $1.45 per square foot. Production required 410 direct labor hours that cost $12.50 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.50 per square foot. The labor standard was 0.025 direct labor hours per fender, at a standard cost of $11.50 per hour.

Answer 1

Materials

Standard Budget			Actual
Units	$	Total	Units	$	Total
140000	1.5	210,000	141000	1.45	204,450

Direct Material Variances:

Direct Material Price Variance = Standard Cost for Actual Quantity – Actual Cost

=210,000 - 204,450 = 5,550 F

Direct Material Price Usage Variance = Actual Quantity at Actual Price - Standard Quantity at Actual price

= 1.45 * ( 141,000-140,000)

= 7,050 F

Direct Material Efficiency Variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity in Standard Proportion

= 1.5 * (140000-141000)

= 1500 U

Labor

Standard Budget			Actual
Hours	$	Total	Hours	$	Total
500 (20000*.025)	11.5	5,750	410	12.5	5,125

Direct Labor Variances:

Direct Labor Rate Variance = Actual hours worked × Actual rate – Actual hours worked × Standard rate

= 5,125 - 4,715 = 410 F

Direct Labor Usage Variance = Actual hours worked × Standard rate – Standard hours allowed × Standard rate
= 11.5 * ( 410-500)

= 1,035 F

Direct Labor Efficiency Variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity in Standard Proportion

= 5,750 -5,125

= 625 U