Question

Antuatica uses a standard cost system for materials and labor in producing small fishing boats. Production requires fiberglass, paint and a purchased trim package as well as direct as follows:

2,000 pounds of fiberglass @ $1.80 per pound	$3,600
6 quarts of gel coat paint @ $15 per quart	90
1 trim package	200
40 hours of labor @ $25 per hour	1,000
Standard cost for DM and DL	$4,890

The following actual data related to the production of 600 boats was recorded in July

Materials Purchased on Account

Fiberglass – 2,100,000 pounds @$1.83 per pound

Paint – 1,000 gallons @$55.50 per gallon

Trim Packages – 640 @ $205 per package

Materials Used

Fiberglass – 1,380,000 pounds

Paint – 924 gallons

Trim packages – 608

Direct Labor Used

23,850 hours @ $23.50 per hour

REQUIRED:

1. Determine the direct materials price and efficiency variances for Fiberglass.

Answer 1

1. Matrial Price Variance = $40,282 Unfavourable (41400-4158+3040)

(Standard Price X Actual Quantity) - (Actual Price X Actual Quantity)

2.Material Efficency (qty/ usage) Variance = $3,27,040 unfavourable (324000 + 1440 + 1600)

(Standard price x Standard qty) - (Standard price x Actual quantity)

Note

1. efficency variance for direct material only calculated as asked, Direct labour details also given in problem check wheather it is Direct Labour Efficency Variance

2.If paint is treated as Indirect material dont add

Working

Material Price Variance

Fiber Glass

(1.80 x 13,80,000) – (1.83 x 13,80,000) = $41,400 Unfavourable

Standard Price = $1.80

Actual Price      = $1.83

Actual Quantity = 2300 Pounds (13,80,000 Pounds/ 600 Boats)

Paint

(60 x 924) -(55.5 x 924) = $4,158 favourable

Standard Price = $60 (15 x4)

Actual Price = $55.5

Actual Qantity = 924 gallons

Trim Package

(200 X 608) - (205 x 608) = $3,040 Unfavourable

Standard Price = $200

Actual Price = $205

Actual Quantity = 608 packages

2.

Material Efficency(Quantity/ Usage) Variance

Fiber Glass

(1.80 x 12,00,000) – (1.80 x 13,80,000 ) = $3,24,000 Unfavourable

Standard Price = $1.80

Standard Quantity =12,00,000 Pounds (2000 pounds x 600 Boats)

Actual Quantity = 13,80,000 Pounds

Paint

(60 x 900) -(60 x 924) = $1440 Unfavourable

Standard Price = $60 (15 x4)

Standard Qty = 900 gallons ( 600 boats x 6 quarts / 4(conversion of quarts to gallon))

Actual Qantity = 924 gallons

Trim Package

(200 X 600) - (200 x 608) = $1,600 Unfavourable

Standard Price = $200

Standard Qty = 600 Packages ( 600 boat x 1 package)

Actual Quantity = 608 packages