Question

Basil Tooling uses a standard cost system to account for the costs of its one product. Standards are 4.0 sheets of ½ inch steel at $110 per sheet and 14.1 hours of labor at a standard wage rate of $14. During July, Basil Tooling produced 600 units. Materials purchased and used totaled 2,550 sheets at a total cost of $268,900. Payroll totaled $122,120 for 8,800 hours worked.

a. Calculate the direct materials price variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



b. Calculate the direct materials quantity variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



c. Calculate the direct labor rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



d. Calculate the direct labor efficiency variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Answer 1

Material Price variance = Actual Quantity purchased* (Actual Price - Standard Price)

Material Price variance = 2,550 * (($268,900/2,550) - $110)

Material Price variance = $11,600 F

Material Quantity variance = Standard Price * (Actual Quantity used - Standard Quantity)

Material Quantity variance = $110 * (2,550 - (600*4))

Material Quantity variance = $16,500 U

Labour rate variance = Actual hours * (Actual rate-Standard rate)

Labour rate variance = 8,800 * (($122,120/8,800) - $14)

Labour rate variance = $1,080 F

Labor efficeincy variance = Standared rate * (Actual Hours - Standard Hours)

Labor efficeincy variance = $14 * (8,800 - (600*14.10))

Labour efficeincy variance = $4,760 U

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