Question

Part of your company’s accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "per unit" answer values to 2 decimal places.)

Direct Labor Direct Material Standard price or rate per unit of input per hour $7.00 per lb Standard quantity per unit of output hours per unit lbs per unit Actual quantity used per unit of output 1.80 hours lbs per unit Actual price or rate per unit of input $11.00 per hour $6.00 per lb Actual output 5,000 units 5,000 units Direct-material price variance $34,000 F Direct-material quantity variance Total direct-material variance $20,000 F Direct-labor rate variance Direct-labor efficiency variance $10,000 F Total direct-labor variance $1,000 F

Answer 1

	Direct Labour	Direct material
Standard price or rate per unit of output	10 per hour	9 per lb
Standard quantity per unit of output	1.6 hours per unit	6.4 lbs per unit
Actual quantity per unit of output	1.8 hours	6.8 lbs per unit
Actual price per unit of output	11 per hour	6 per lb
Actual output	5000 units	5000 units
Direct material price variance		34000F
Direct material quantity variance		14000F
Total direct material variance		20000F
Direct labour rate variance	9000 U
Direct labour efficiency variance	10000F
Total direct labour variance	1000F

Direct labour rate variance = direct labour efficiency - total direct labour variance = 9000F

Direct labour rate variance

=(Actual price-standard price) * actual hours

=(11-standard price) *(5000*1.8) = 9000

= 11-standard price = 1

= standard price per unit output = 10 perhour

Direct material price variance

(actual price-standard price) * actual quantity purchased

= (6-7)* actual quantity purchased = 34000

Actual quantity purchased perunit output= 34000/5000. = 6.8 lbs per unit

Direct labour efficiency variance

=(Actual hours-standard hours) *standard rate

= [(9000-5000)*standard qty per unit output] *10 = 10000

=80000/50000

= standard quantity per unit of output = 1.6 hours per unit

Direct material quantity variance

Direct material quantity variance = direct material price variance - total direct material variance

= 34000-20000. = 14000

Also, direct material quantity variance = (actual quantity - standard quantity) *standard rate

= [34000-(5000*standard quantity per unit output)] *7

=standard quantity per unit output = 224000/3500 = 6.4 lbs per unit