Question

Please use the following information for a company that makes and sell clocks for problems 2 and 3 below::

Actual number of clocks to be produced and sold 2,000

Standard quantity of 3 pounds of material per unit

Standard price of $5 per pound

Standard quantity of 2 hours of direct labor per unit

Standard rate of $10 per direct labor hour

Actual results:

Direct materials cost 3.5 pounds of material per unit costing $4 per pound

Direct labor cost 1.5 hours of direct labor per unit costing $16 per direct labor hour

2. Please calculate the direct materials price and quantity variances

3. Please calculate the direct labor rate and efficiency variances

Answer 1

Direct Material
Standard Price (SP)			$5.00
Standard Quantity (SQ) (3*2000)			6,000
Actual Quantity (AQ) (3.5*2000)			7,000
Actual price (AP)			$4.00

Material Price Variance:
AQ	X	SP	Minus	AQ	X	AP
7,000	X	$5.00	Minus	7,000	X	$4.00
35,000			Minus	28,000			7,000	Favourable

Material Quantity Variance:
SQ	X	SP	Minus	AQ	X	SP
6,000	X	$5.00	Minus	7,000	X	$5.00
		30,000	Minus			35,000	(5,000)	Unfavourable

Direct Labour
Standard Rate (SR)	$10.00
Standard Hours (SH) (2 *2,000)	4,000
Actual Hours (AH) (1.5 *2,000)	3,000
Actual Rate (AR)	$16.00

Labour Rate Variance:
AH	X	SR	Minus	AH	X	AR
3,000	X	$10.00	Minus	3,000	X	16.00
30,000			Minus	48,000			(18,000)	Unfavourable

Labour Efficiency Variance:
SH	X	SR	Minus	AH	X	SR
4,000	X	$10.00	Minus	3,000	X	$10.00
40,000			Minus	30,000			10,000	Favourable