Nancy Drew Manufacturing produces a single product and has prepared the following standard cost sheet for one unit of the product:
Direct materials (8 pounds at 2.00 per pound) 16.00
Direct Labour (5 hours at 13 per hour) 65
During the month of April, the company manufactures 240 units and incurs the following actual costs:
Direct materials purchased and used (2000 pounds) 4420
Direct Labour (1220 hours) 15677
Instuctions : Compute and round to dollars and cents the following (indicate fav or unfav):
Total materials variance
materials price variance
materials quantity variance
Total Labour variance
Labour rate variance
labour time variance
Total materials variance = (SQ*SR) - (AQ*AR) = (16*240) - 4420 = 580 Unfavorable |
Materials Price Variance = (SP-AP) * AQ = (2 - 4420/2000) * 2000 = 420 Unfavorable |
Materials Quantity Variance = (SQ-AQ) * SP = (240*8 - 2000)*2 = 160 Unfavorable |
Total labor variance = (SR*SH) - (AR*AH) = (240*65) - 15677 = 77 Unfavorable |
Labor Rate Variance = (SR-AR) * SH = (13 - 15677/1220) *1220 = 183 Favourable |
Labor time variance = (SH-AH) * SR = (240*5 - 1220)*13 = 260 Unfavorable |
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