Question

1. O’Brien Vineyards has the following direct materials standard to manufacture one bottle of Pinot Noir:
2.4 pounds of grapes per bottle at $1.65 per pound
Last week, 5,415 pounds of grapes were purchased and used to make 2,125 bottles. The grapes cost a total of $9,043.05.
What is O’Brien Vineyards materials quantity variance and the materials price variance? (Don’t forget to indicate if the variances are favorable or unfavorable).
What are 2 possible reasons for the variances?
2. O’Brien Vineyards has the following direct labor standard to bottle, cork and label one bottle of Pinot Noir:
0.33 standard hours per bottle at $11.25 per direct labor hour
Last week, 777 direct labor hours were worked at a total labor cost of $8,787 to bottle, cork and label 2,125 bottles.
What is O’Brien Vineyards labor efficiency variance and the labor rate variance? (Don’t forget to indicate if the variances are favorable or unfavorable).
What are 2 possible reasons for the variances?

Answer 1

Solution 1:

O’Brien Vineyards materials quantity variance and the materials price variance are

Material Price Variance
Actual Price	Standard Price	AP-SP	Actual Quantity	Variance (AP-SP)*Actual Qty
1.67	1.65	$0.02	5,415	108.30	Unfavourable
9,043.05/5,415
Material Quantity Variance
Actual Quantity	Standard quantity	AQ-SQ	Standard Price	Variance (AQ-SQ)*SP
5,415	5,100	315	$1.65	520	Unfavourable
	(2,125*2.4)

Actual quantity of grapes used is more than the budgeted quantity of grapes.

Actual price of per pound grape is more than budgeted price of per pound grape.