Question

Taylor Sporting Goods manufactures sleeping bags. The manufacturing standards per sleeping bag, based on 5,000 sleeping bags per month, are as follows:

Direct material of 5.50 yards at $5.50 per yard

Direct labor of 3.00 hours at $20.00 per hour

Overhead applied per sleeping bag at $17.00

In the month of April, the company actually produced 5,200 sleeping bags using 27,300 yards of material at a cost of $5.70 per yard. The labor used was 11,700 hours at an average rate of $20.50 per hour. The actual overhead spending was $96,200.

Determine the total materials variance and round to the nearest whole dollar. Enter a favorable variance as a negative number. Enter an unfavorable variance as a positive number.

Answer 1

Sol: Calculation of Material Variances:

Standard quantity = 5,000 × 5.50 = 27,500

AR = Actual Rate

SR = Standard Rate

AQ = Actual quantity

SQ = Standard quantity

Material Price Variance :

AQ (SR - AR)

= 27,300 ($5.50 - $5.70) = $5,460 (unfavourable)

Material Usage Variance :

SR(SQ - AQ)

= $5.50 (27,500 - 27,300) = $1,100 (favourable)

Material Cost Variance :

(SR × SQ) - (AQ × AR)

= ($5.50 × 27,500) - ($5.70 × 27,300)

= $151,250 - $155,610 = $4,360(unfavourable)