Question

Company makes bags on a standard costing basis. Over the past years, the company has determined a standard materials quantity allowed of 0.15 pound per at a standard price agreed with suppliers at $2 per pound. Historically, the company has been producing 11,000 per month. During the just concluded month apruiil 2018  company records show 10,500 produced with an actual cost of $10600 with 8,300 pounds purchased and used in production. Further information reveals that the company has standardized 0.25 hours to finish one unit at a standard rate of $7.00. Time tickets reveal that actual payroll for direct labor amounted to $11500 with 2,200 hours worked

Find Total Materials Variance 2. Total Labor Variance 3. Materials Price Variance 4. Materials Quantity Variance 5. Labor Rate Variance 6. Labor Efficiency Variance 7. Compute the Materials Quantity Variance assuming only 5,500 units were produced with actual usage of 3,500 pounds, the remaining materials were left in ending inventory

Answer 1

1 Total Material Variance = Actual Material Cost - Standard Quantity x Standard Price
= $10600 - 10500 x 0.15 x 2 = $7450 (U)

2. Total Labor Variance = Actual labor cost - Standard Hours x Standard Rate
= $11500 - 10500 x 0.25 x $7 = $6875 (F)

3. Material Price Variance = Actual Material Cost - Actual Quantity x Standard Price
= $10600 - 8300 x $2 = $6000 (F)

4. Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (8300 - 10500 x 0.15) x $2 = $13450 (U)

5. Labor Rate Variance = Actual Labor cost - Actual hours x Standard rate
= $11500 - 2200 x $7 = $3900 (F)

6. Labor Efficiency Variance = (Actual hours - Standard hours) x Standard rate
= (2200 - 10500 x 0.25) x $7 = $2975 (F)

7. Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (3500 - 5500 x 0.15) x $2 = $5350 (U)