Question

# Jay Levitt Company budgeted the following cost standards for the current year: Direct materials (2 kg...

Jay Levitt Company budgeted the following cost standards for the current year:

 Direct materials (2 kg of plastic at \$5 per kilogram) \$10.00 Direct labour (2 hours at \$12 per hour) 24.00 Variable manufacturing overhead 11.85 Fixed manufacturing overhead 6.15 Total standard cost per unit \$52.00

Actual costs for producing 2,690 units were as follows:

 Direct materials used 5,920 kg Direct materials purchased (6,730 kg) \$32,304 Direct labour (6,950 hours) \$67,415 Variable manufacturing costs \$32,200 Fixed manufacturing costs \$17,700

1. Calculate the materials price variance for materials purchased. Favourable or unfavourable ?

2. Calculate the materials quantity variance.Favourable or unfavourable ?

3.Calculate the labour price variance. (Round answer to the nearest whole dollar, e.g. 5,275.) Favourable or unfavourable ?

4.Calculate the labour quantity variance. Favourable or unfavourable ?

a. Materials price variance = (Actual quantity purchased * Actual price) - (Actual quantity purchased * Standard price)

= \$32,304 - (6,730 * \$5)

= \$1,346 Favorable

b. Materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

= (5,920 * \$5) - (2,690 * 2 * \$5)

= \$2,700 Unfavorable

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

= \$67,415 - (6,950 * \$12)

= \$15,985 Favorable

d. Labour efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (6,950 * \$12) - (2,690 * 2 * \$12)

= \$18,840 Unfavorable

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