Question

E9-13 Determining Actual Costs, Standard Costs, and Variances [LO 9-3, 9-4]

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows:

Actual purchase price	$ 2.00	per lb.
Actual direct labor rate	$ 7.20	per hour
Standard purchase price	$ 1.80	per lb.
Standard quantity for sets produced	940,000	lbs.
Standard direct labor hours allowed	15,000
Actual quantity purchased in October	1,085,000	lbs.
Actual direct labor hours	9,000
Actual quantity used in October	970,000	lbs.
Direct labor rate variance	$5,200	F

Required:
1. Calculate the total cost of purchases for October.



2. Compute the direct materials price variance based on quantity purchased. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)



3. Calculate the direct materials quantity variance based on quantity used. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)



4. Compute the standard direct labor rate for October. (Round your answer to 2 decimal places.)



5. Compute the direct labor efficiency variance for October. (Round your intermediate calculation to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Answer 1

1. Total cost of purchases for october = 1,085,000 lbs * $2 per lb

= $2,170,000

2. Direct materials price varaince = (Actual quantity purchased * Actual price) - (Actual quantity purchased * Standard price)

= (1,085,000 * $2) - (1,085,000 * $1.8)

= $217,000 Unfavorable

3. Direct materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

= (970,000 * $1.8) - (940,000 * $1.8)

= $54,000 Unfavorable

4. Direct labor rate variance = $5,200 F

(Actual hours * Actual rate) - (Actual hours * Standard rate) = $(5,200)

(9,000 * $7.2) - (9,000 * SR) = $(5,200)

Standard rate = $7.78

5. Direct labor efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (9,000 * $7.78) - (15,000 * $7.78)

= $46,680 Favorable