Standard Costing
Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established:
| Direct materials (4 lbs. @ $0.95) | $ 3.80 |
| Direct labor (1.25 hours @ $15.00) | 18.75 |
| Standard prime cost | 22.55 |
During December, 78,000 pounds of material were purchased and used in production. There were 15,000 cases produced, with the following actual prime costs:
| Direct materials | $ 74,000 |
| Direct labor | $315,000 (for 22,500 hrs.) |
Required:
1. Compute the materials variances. If there is no variance, enter "0" in the amount box and select "No variance" from the dropdown menu.
| Materials price variance | $____ | Favorable |
| Materials usage variance | $_____ | Unfavorable |
| Overall materials variance | $______ | Unfavorable |
2. Compute the labor variances. If there is no variance, enter "0" in the amount box and select "No variance" from the dropdown menu.
| Labor rate variance | $____ | Favorable |
| Labor efficiency variance | $____ | Unfavorable |
| Overall labor variance | $____ | Unfavorable |
Requirement 1
| Materials price variance | $ 100 | Favorable |
| Materials usage variance | $17,100 | Unfavorable |
| Overall materials variance | $17,000 | Unfavorable |
Requirement 2
| Labor rate variance | $22,500 | Favorable |
| Labor efficiency variance | $56,250 | Unfavorable |
| Overall labor variance | $33,750 | Unfavorable |
Working
| 15000 | Cases | ||
| Quantity (AQ) | Rate (AR) | Actual Cost | |
| Direct Material | 78000 | $ 0.9487 | $ 74,000.00 |
| Direct labor | 22500 | $ 14.00 | $ 315,000.00 |
.
| Standard DATA for | 15000 | Cases | |
| Quantity (SQ) | Rate (SR) | Standard Cost | |
| [A] | [B] | [A x B] | |
| Direct Material | ( 4 lbs x 15000 Cases)=60000 lbs | $ 0.95 | $ 57,000.00 |
| Direct labor | ( 1.25 hours x 15000 Cases)=18750 hours | $ 15.00 | $ 281,250.00 |
.
| Material Price Variance | ||||||
| ( | Standard Rate | - | Actual Rate | ) | x | Actual Quantity |
| ( | $ 0.9500 | - | $ 0.9487 | ) | x | 78000 |
| 100 | ||||||
| Variance | $ 100.00 | Favourable-F | ||||
| Material Quantity Variance | ||||||
| ( | Standard Quantity | - | Actual Quantity | ) | x | Standard Rate |
| ( | 60000 | - | 78000 | ) | x | $ 0.95 |
| -17100 | ||||||
| Variance | $ 17,100.00 | Unfavourable-U | ||||
| Material Spending Variance | ||||||
| ( | Standard Cost | - | Actual Cost | ) | ||
| ( | $ 57,000.00 | - | $ 74,000.00 | ) | ||
| -17000 | ||||||
| Variance | $ 17,000.00 | Unfavourable-U | ||||
.
| Labor Rate Variance | ||||||
| ( | Standard Rate | - | Actual Rate | ) | x | Actual Labor Hours |
| ( | $ 15.00 | - | $ 14.00 | ) | x | 22500 |
| 22500 | ||||||
| Variance | $ 22,500.00 | Favourable-F | ||||
| Labour Efficiency Variance | ||||||
| ( | Standard Hours | - | Actual Hours | ) | x | Standard Rate |
| ( | 18750 | - | 22500 | ) | x | $ 15.00 |
| -56250 | ||||||
| Variance | $ 56,250.00 | Unfavourable-U | ||||
| Labor Spending Variance | ||||||
| ( | Standard Cost | - | Actual Cost | ) | ||
| ( | $ 281,250.00 | - | $ 315,000.00 | ) | ||
| -33750 | ||||||
| Variance | $ 33,750.00 | Unfavourable-U | ||||
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