The English Company uses a standard cost system. The current periods data regarding production is as follows:
- Material purchased and used 13,600 pounds.
- Direct-labor costs incurred, 22,000 hours, $ 7.50 per hour.
- Variable-overhead costs incurred, $ 19,000.
- Finished units produced, 2,000.
- Actual material costs, $ 1.85 per pound
- Variable overhead rate, $ 1.60 per hour.
- Standard direct-labor cost, $ 8.00 per hour.
- Standard material cost, $ 2.00 per pound.
- Standard pounds of material in a finished unit, 6.
- Standard direct-labor hours per finished unit, 10.
Prepare schedules of the price and efficiency/quantity variances, for Direct
Material and Direct Labor (3 column variance analysis)..
Solution:
| Direct Material Cost Variance | ||||||||||
| Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||
| AQ * | AP = | AQ * | SP = | SQ * | SP = | |||||
| 13600 | $1.85 | $25,160.00 | 13600 | $2.00 | $27,200.00 | 12000 | $2.00 | $24,000.00 | ||
| $2,040 U | $3,200 U | |||||||||
| Direct Material Price Variance | Direct Material Qty variance | |||||||||
| Direct Labor Cost Variance | ||||||||||
| Actual Cost | Standard cost for actual quantity | Standard Cost | ||||||||
| AH* | AR = | AH* | SR = | SH * | SR = | |||||
| 22000 | $7.50 | $165,000.00 | 22000 | $8.00 | $176,000.00 | 20000 | $8.00 | $160,000.00 | ||
| $11,000 F | $16,000 U | |||||||||
| Direct labor rate Variance | Direct Labor efficiency variance | |||||||||
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