Question

XYZ Company manufactures tables. A standard cost card for the manufacture of one table shows the following:

Standard Cost per Table	Standard Cost per Table	Standard Cost per Table
Direct material:	4 sq. ft. @ $3 per sq. ft.	$12
Direct labor:	2 hours @ $8 per hour	$16
Total Prime Costs		$28

In November, the company produced 1,000 tables. Actual production took 2,300 direct labor hours and 3,900 square feet of lumber. The lumber cost $12,090 while the workers' average pay was $7,80 per hour.

Required:

Calculate the price and quantity variances for direct materials and the rate and efficiency variances for direct labor.

Answer 1

Direct materials price variances = (Standard rate - actual rate) x Actual quantity
= {$3 - ($12,090 / 3,900)} x 3,900 = $390 Unfavorable

Direct quantity price variances = (Standard quantity - actual quantity) x Standard rate
= {(1,000 x 4) - 3,900} x $3 = $300 Favorable

Direct labor rate variances = (Standard rate - actual rate) x Actual hours
= ($8.00 - $7.80) x 2,300 = $460 Favorable

Direct labor efficiency variances = (Standard hours - actual hours) x Standard rate
= {(1,000 x 2) - 2,300) x $8 = $2,400 Unfavorable