Question

     The accountant of JYD Corporation prepared the following cost analysis report on direct labor costs for the jobs completed during the previous months:

Job         Actual Hrs. at Actual Rates           Actual Hrs. at Standard Rates      Standard Hrs. at Standard Rates

105         P2,270                                                   P2,590                                                   P2,170

110         10,740                                                   10,970                                                   10,500

117         4,730                                                   4,900                                                   4,620

120         13,850                                                   13,600                                                   13,480

Total      P31,590                                P32,060                                P30,770

1. What is the total direct labor variance for the jobs completed?
2. What is the labor rate variance?
3. What is the labor efficiency variance?

The following information pertains to Peter Senen Company’s production on a one unit of Product A:

                                                                Quantity                              Price                      Cost per Unit

Materials-standard                         7.5 kgs                                  P0.30/kg              P2.25/unit

Labor –standard                                  .6 hr.                                   10.00/hr.             6.00/unit

During the period, the company produced 15,000 units of Product A. It purchased 140,000 kgs. of materials at P0.25 per kilo. It incurred direct labor cost of P90,780 at P10.20 per labor hour used. At the end of the period, the company’s inventory of materials increased by 25,000 kgs. The company recognizes the material price variance when materials are purchased.

4. How much was the company’s material price variance?
5. What was the company’s materials quantity variance?

Answer 1

Total Direct Labor variance = Actual Hrs. at Actual Rates - Standard Hrs. at Standard Rates
= 31590- 30770 = P820 (U)

Direct Labor Rate Variance =  Actual Hrs. at Actual Rates - Actual Hrs. at Standard Rates
= 31590 - 32060 = P470 (F)

Direct labor efficiency variance = Actual Hrs. at Standard Rates - Standard Hrs. at Standard Rates
= 32060 - 30770 = P1290 (U)

Peter Senen Company

Direct Material Price Variance = (Actual Price - Standard Price) x Actual Quantity purchased
= (0.25 - 0.30) x 140000 = P7000 (F)

Direct Material Quantity Variance = (Actual Quantity used - Standard Quantity) x Standard price
= (115000 - 15000 x 7.5) x 0.30 = P750 (U)