Question

# The budget for the month of May was for 13,200 units at a direct materials cost...

The budget for the month of May was for 13,200 units at a direct materials cost of \$24 per unit. Direct labor was budgeted at 33 minutes per unit for a total of \$118,800. Actual output for the month was 9,400 units with \$150,000 in direct materials and \$86,775 in direct labor expense. The direct labor standard of 33 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a(n): (CMA adapted)

• It is given that direct labor standard of  33 minutes was obtained throughout the month
• . So Labor Efficiency Variance is Nil.
• Actual Price paid for each unit of direct material

​​​​​​​ = \$150,000 / 9,400

= \$15.95

• Materail Price Variance

= (Standard Price - Actual Price) x Actual Units

= (24 - 15.95) x 9,400

= \$75670

• Material Usage Variance

=  (Standard Units - Actual Units) x Standard Price

= (13,200 - 9,400) x 24

= \$91,200

• Labor Rate Variance

= Labor Cost Variance - Labor Efficiency Variance

= (1,18,800 - 86,775) - 0

= \$32,025

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