Question

Ramsey Fabrics manufactured 500 units of a special multilayer fabric with the trade name style. The following information from the style product department.

Direct materials purchased: 18, 000 meters at RM1.38 per meter          RM 24,840

Direct materials used: 9,500 at RM 1.38per meter                                   13,110

Direct labor: 2,100 hours at RM9.15 per hour.                                               19,215

The standard prime cost for one unit of style are as follow:

Direct materials: 20 meters at RM1.35 per meterRM27.00

Direct labor: 4 hours at RM8.90 per hour36.00

Total standard prime cost per unit RM63.00

Required:

Compute the following variances, indicating whether each variance is favorable or unfavorable.

Total of direct- material variances.

Direct-material price variance.

Direct-material usage variance.

Total of direct-labor variances.

Direct-labor rate variance.

Direct-labor efficiency variance.

Answer 1

Solution
SQ =	Standard Quantity for Actual Production
SP =	Standard Price
AQ =	Actual Quantity
AP =	Actual Price
SH =	Standard Hours for Actual Production
SR =	Standard Rate
AH =	Actual Hours
AR =	Actual Rate
Computation of Material variances
1	2	3
SQxSP	AQxAP	SQxAP
10000 x 1.35	9500 x 1.38	10000 x 1.38
13500	13110	13800
SQ =	20 Materx 500 =	10000	Meters
Total Direct Material variance (1-2) =			390	(Favourable)
Direct-material price variance (3-2) =			690	(Favourable)
Direct-material usage variance (1-3) =			-300	(Adverse)
Computation of Labour variances
1	2	3
SHxSR	AHxAR	SHxAR
2000 x 8.90	2100 x 9.15	2000 x 9.15
17800	19215	18300
SH =	4 x 500	2000	Hours
Total of direct-labor variances (1-2)=			-1415	(Adverse)
Direct-labor rate variance. (3-2)=			-915	(Adverse)
Direct-labor efficiency variance(1-3)=			-500	(Adverse)