Question

Superior Mfg. Company is a manufacturer of large ceramic dishes. The standard materials quantity is 1.2 pound of ceramic per dish at a standard price of $3.00 per pound. The actual quantity for the production of 550 dishes was 1.6 pounds per dish, at an actual price of $3.25 per pound.

#6) Calculate the Material Price Variance (Indicate Favorable or Unfavorable)

#7) Calculate the Direct Material Efficiency Variance (Indicate Favorable or Unfavorable).

Continuing with Superior Company….. The standard direct labor time is 1.2 hour per dish, at a price of $25 per hour. The actual results for the production of the 550 dishes were 1.0 hour per dish, at a price of $20 per hour.

#8) Calculate the Direct Labor Price Variance (Indicate Favorable or Unfavorable)

#9) Calculate the Direct Labor Efficiency Variance (Indicate Favorable or Unfavorable)

Answer 1

Answer:

6) Direct Material Price Variance

Actual Quantity for 550 dishes = 550 dishes * 1.6 pounds per dish = 880 pounds

Material Price Variance = (Actual Quantity * Standard Price) - (Actual Quantity * Actual Price)

                                          = (880 pounds * $3.0 per pound) - (880 pounds * $3.25 per pound)

                                         = $2,640 - $2,860

                                         = ($220)

                                         = $220 Unfavorable

7) Direct Material Efficiency Variance

Standard Quantity per dish = 1.2 pounds

Standard Quantity for 550 dishes = 1.2 pounds * 550 = 660 pounds

Material efficiency Variance = (Standard Quantity * Standard Price) - (Actual Quantity * Standard Price)

                                                = (660 pounds * $3.0 per pound) - (880 pounds * $3.0 per pound)

                                               = $1,980 - $2,640

                                               = ($660)

                                               = $660 Unfavorable

8) Direct Labor Price Variance

Actual hours for 550 dishes = 550 dishes * 1.0 hour per dish = 550 hours

Labor Price Variance = (Actual hours * Standard rate) - (Actual hours * Actual rate)

                                       = (550 hours * $25 per hour) - (550 hours * $20 per hour)

                                      = $13,750 - $11,000

                                      = $2,750

                                      = $2,750 Favorable

9) Direct Labor Efficiency Variance

Standard hours per dish = 1.2 hour

Standard hours for 550 dishes = 1.2 hours * 550 = 660 hours

Labor efficiency Variance = (Standard Hours * Standard rate) - (Actual hours * Standard rate)

                                                = (660 hours * $25 per hour) - (550 hours * $25 per hour)

                                               = $16,500 - $13,750

                                               =$2,750

                                               = $2,750 Favorable