Question

New Jersey Valve Company manufactured 8000 units during January of a control calve used by milk processors in its Camden plant. Records indicated the following:

Direct labor	40,800	hr. at $14.50 per hr.
Direct material purchased	24,000	lb. at $2.30 per lb.
Direct material used	23,100	lb.

The control valve has the following standard prime costs:

Direct material	3	lb. at $2.20 per lb.	$	6.60
Direct labor	5	hr. at $15.00 per hr.		75.00
Standard prime cost per unit			$	81.60

1. Prepare a schedule of standard production costs for January, based on actual production of 8000 units.

NEW JERSEY VALVE COMPANY: CAMDEN PLANT
Schedule of Standard Production Costs
Based on 8,000 Units
For the Month of January
	Standard Costs
Direct material
Direct labor
Total standard production costs

2. For the month of January, compute the following variances.

a.	Direct-material price variance _____
b.	Direct-material quantity variance____
c.	Direct-material purchase price variance_____
d.	Direct-labor rate variance________
e.	Direct-labor efficiency variance_______

Answer 1

1) Schedule of standard production cost :

	Standard Cost
Direct material (8000*6.6)	52800
Direct labour (8000*75)	600000
Total Standard production cost	652800

2) DIrect material price variance = (2.20-2.30)*23100 = 2310 U

Direct material quantity variance = (8000*3-23100)*2.2 = 1980 F

Direct material purchase price variance = (2.20-2.30)*24000 = 2400 U

Direct labour rate variance = (15-14.50)*40800 = 20400 F

Direct labour efficiency variance = (8000*5-40800)*15 = 12000 U