Question

Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.

Direct Labor:	Direct Material:
Quantity,0.16 hour	Quantity, 9 kilograms
Rate, $8.00 per hour	Price, $0.42 per kilogram

Actual material purchases amounted to 233,200 kilograms at $0.475 per kilogram. Actual costs incurred in the production of 22,000 units were as follows: Direct labor: $33,264 for 3,960 hours Direct material: $98,230 for 206,800 kilograms Required: Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

Direct Material Price Variance:

Direct Material Quantity Variance:

Direct Material Purchase Price Variance:

Direct Labor Rate Variance:

Direct Labor Efficiency Variance:

Answer 1

Material:
Std qty allowed (22000*9): 198000 kgs
Std price per kg: $ 0.42 per kg
Actual used: 206800 kgs
Actual qty purchased: 233200 kgs
Actual Price per kg:		0.475
Material price variance: Actual Qty used(Std price- Actual price)
		206800 (0.42-0.475) = $11374 Unfav
Material Qty variance: Std price (Std Qty-Actual qty)
		0.42 (198000-206800) = $ 3696 Unfav
Material purchase price variance: Actual Qty purchased (Std price-Actual price)
			233200 (0.42-0.475)= $ 12826 Unfav
Labour:
Std labour hours allowed (22000*0.16):				3520
Std rate per hour:				8
Actual labour hours				3960
Actual rate per hour:		(33264/3960)		8.4
Labour rate variance: Actual hours(Std rate-Actual rate)
		3960 (8.00-8.40) = $ 1584 Unfav
Labour efficiency variance: Std rate (Std hours-Actual hours)
		8.00 (3520 - 3960 ) = 3520 Unfav