Question

inglenook makes a product with the following standard costs: std quantity std pricestd cost or hoursor rateper unit direct materials ( in pounds)8.2$7.00 $57.40 direct labor (in hours)0.4$20.00 $8.00 variable overhead0.4$2.00 $0.80 total standard cost per unit$66.20 the company budgeted for production of 2,500 units in june, but actual production was 2,550 units. the company used 19,750 pounds of direct material and 1,040 direct labor-hours to produce this output. the company purchased 21,000 pounds of the direct material at $6.60 per pound. the actual direct labor rate was $19.50 per hour and the actual variable overhead rate was $1.80 per hour. units the company applies variable overhead on the basis of direct labor-hours. the direct materials purchases variance is computed when the materials are purchased. a.calculate the materials price and quantity variances for june. b.calculate the labor rate and efficiency variances for june.

Answer 1

a. Materials price variance= (Std price - Actual price) * Actual quantity

= ($7.00 - $6.60) * 19,750 = $1,570 favorable variance

Materials quantity variance= (Actual quantity - Std quantity) * Std price

= (19,750 - (2,550 * 8.2)) * $7.00

= 1,377 * $7.00= $9,639 unfavorable variance

b. Labor rate variance= (Std rate - Actual rate) * Actual labor hours

= ($20.00 - $19.50) * 1,040 = $208 favorable variance

Labor efficiency variance= (Std hours - Actual hours) * Actual rate

= ((2,550 * 0.4) - 1,040) * $19.50

= (1,020 - 1,040) * $19.50= $380 unfavorable variance