Question

Part A

Sonne Company produces a perfume called Whim. The direct materials and direct labor standards for one bottle of Whim are given below:

During the most recent month, the following activity was recorded:

	Standard Quantity or Hours	Standards Price or Rate	Standard Cost
Direct Materials	7.2 ounces	$2.50 per ounce	$18.00
Direct Labor	0.4 ounces	$10.00 per hour	$4.00

During the most recent month, the following activity was recorded:

a. Twenty thousand ounces of material were purchased at a cost of $2.40 per ounce.

b. All of the material was used to produce 2,500 bottles of Whim.

c. Nine hundred hours of direct labor time were recorded at a total labor cost of $10,800

Required:

1. Compute the direct materials quantity and price variances for the month.

2. Compute the direct labor efficiency and rate variances for the month

Refer to the data in Part A

Assume that instead of producing 2,500 bottles of Whim during the month, the company produced only 2,000 bottles using 16,000 ounces of material. (The rest of the material purchased remained in raw materials inventory.) See Part A.

Required:

Compute the direct materials quantity and price variances for the month.

Answer 1

Std material Quantity per unit: 7.2 unitts
Actual output: 2500 units
Std qty allowed (2500*7.20): 18000 units
Std price per unit: $ 2.50
Actual price per unit: $2.40 per unit
Actual Qty used: 20,000 units
Material price variance = Actual Quantity (Std price -Actual price)
		20000 (2.50-2.40) = 2000 F
Material Quantity variance = Std price (Std Quantity -Actual Quantity)
		2.50 (18000-20000) = 5000 U
Std labouor hours per unit: 0.40 hours
Std labour hours allowed (2500*.04): 1000 hours
Actual labour horus: 900 hours
Std rate per hour: $ 10 per hour
Actual labour rate per hour (10800/900): 12 per hour
labour rate variance: Actual labour horus (Std rate-Actual rate)
		900 (10-12) = $1800 U
Labour Efficiency Variance = Std rate (Std Hhours-Actual Hours)
		10 ( 1000 -900) = 1000 F
Req 2:
Std material Quantity allowed (2000*7.20): 14400 units
Std price per unit: 2.50
Actual Qty pruchassed: 20000 units
Actual Quantity Consumed : 16000 units
Actual price per unit: $ 2.40 per unit
material price Variance   = Actual Qty Purchased (Std price -Actual price)
(Based on Actual Qty purchased)			20000 (2.50-2.40)= $2000 F
Material Qty Variance = Std price (Std Qty-Actual Qty consumed)
		2.50 ( 14400 - 16000) = $4000 U