Question

Problem 8-28B Computing variances

A fire destroyed most of Ordessa Products Corporation’s records. Megan Carey, the company’s accountant, is trying to piece together the company’s operating results from salvaged documents. She discovered the following data:

Standard materials quantity per unit	2.5 pounds
Standard materials price	$8 per pound
Standard labor quantity per unit	0.6 hour
Standard labor price	$24 per hour
Actual number of products produced	8,000 units
Materials price variance	$3,168 Favorable
Materials usage variance	$1,600 Favorable
Labor price variance	$3,904 Unfavorable
Labor usage variance	$1,902 Unfavorable

Required

a. Determine the actual amount of materials used.

b. Determine the actual price per pound paid for materials.

c. Determine the actual labor hours used.

d. Determine the actual labor price per hour.

Answer 1

a) Material usage variance = (Standard quantity-actual quantity)Standard price

                          1600   = (20000*8-8X)

                      8X    = 158400

X(actual amount of material used) = 19800

Material price variance = (Standard price-actual price)Actual quantity

                         3168   = (8*19800-19800X)

          19800X   = 155232

X(actual price per pound) = 7.84

Labour usage variance = (Standard hour-actual hour)Standard rate

                       -1902    = (8000*.6*24-24X)

24X = 117102

X(actual hour) = 4879.25

Labour rate variance = (Standard rate-actual rate)Actual hour

-3904 = (24*4879.25-4879.25X)

4879.25X = 121006

Actual labour price = 24.80