Question

Q . A company is maufacturing 5000 units for the period. Actual and standard direct materials information are: -

Standard Costs: 1.5 pounds per unit; purchase price is 0.78 per pound. Actual Costs: 8000 pounds purchased and used; purchase price is 0.75 per pound. Find material price variance. Also tell if it's favourable or unfavourable.

Q. A company is maufacturing 5000 units for the period. Actual and standard direct materials information are: -

Standard Costs: 1.5 pounds per unit; purchase price is 0.78 per pound. Actual Costs: 8000 pounds purchased and used; purchase price is 0.75 per pound. Find material usage variance. Also tell if it's favourable or unfavourable.?

Q.  A company is maufacturing 5000 units for the period. The following are actual and standard direct labor information:

Standard Costs: 2.5 hours per unit; hourly rate is $20.25 per hour. Actual Costs: 13000 actual hours worked; hourly rate is $19.75 per hour. Find the total direct labor cost variance. Also tell if it's favorable or unfavorable?

Answer 1

• Material Price Variance = ( Standard Price Per unit – Actual price per unit ) * Actual Units

                                                         = (0.78 - 0.75) * 8000

                                                         = 240 pound (Favourable)

• Material Usage Variance = ( Standard Units – Actual Units ) * Standard Price per unit

                                                           = {(1.5*5000) – 8000} *0.78

                                                           = 390 pound (Unfavourable)

• Total Direct Labour Cost Variance =Total Standard Labour Cost–Total Actual Labour Cost

= {(5000*2.5) *20.25} – (13000*19.75)

= 253125 – 256750

= $ 3625 (Unfavourable)