Question

Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $3.90 per pound) $31.20 Direct labor (5 hours at $14.00 per hour) $70.00 During the month of April, the company manufactures 270 units and incurs the following actual costs. Direct materials purchased and used (2,100 pounds) $8,400 Direct labor (1,390 hours) $19,182 Compute the total, price, and quantity variances for materials and labor.

Answer 1

Standard material quantity allowed = 270 units × 8 pounds

= 2,160

Material Price variance = Actual Quantity (Standard price - Actual price)

= 2,100 (3.90 - 4.00)

= 210 Unfavorable

Material Qty variance = Standard price (Standard quantity - Actual quantity)

= 3.90 (2,160 - 2,100 )

= 234 Favorable

Total Material Variance:

= (Standard quantity × Standard price) - (Actual Quantity × Actual price)

= (2,160 × 3.90) - (2,100 × 4)

= 24 Favorable

Labour rate variance = Actual hours (Standard rate - Actual rate)

= 1390(14 -13.80 )

= 278 Favorable

Labor efficiency variance = Standard rate (Standard hours-Actual hours)

= 14 (1350 -1390)

= 560 Unfavorable

Total Labour cost variance:

= (Standard hours × Standard rate) - (Actual Hours × Actual rate)

= (1350 × 14) - (1390 × 13.80)

= 282 Unfavorable