Question

During June, Danby Company’s material purchases amounted to 7,700 pounds at a price of $8.30 per pound. Actual costs incurred in the production of 2,400 units were as follows:

Direct labor:	$	143,325	($19.50 per hour)
Direct material:	$	48,970	($8.30 per pound)

The standards for one unit of Danby Company’s product are as follows:

Direct Labor:	Direct Material:
Quantity, 3 hours per unit	Quantity, 2 pounds per unit
Rate, $19.40 per hour	Price, $8.00 per pound

Required:

Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

	Direct-material price variance       Direct-material quantity variance Direct-material purchase price variance Direct-labor rate variance Direct-labor efficiency variance

Answer 1

SQ = Particulars Direct Material 2400 x SQ 4800 2.00 = SP 8 4800 AQ 5900 AP 8.3 Material Price Variance (MPV) = ( SP - AP) AQ >>MPV = 8 - 8.3 * >>MPV = -1770.00 Unfavorable 5900 Total Material variance (TMV) = ( SQ * SP) - (AQ * AP) >>TMV = 1 4800 * 8 ) - ( 5900 * 8.3 >>TMV = -10570 Unfavorable ) Material Quantity Variance (MQV) = ( SQ - AQ) SP >>MQV = 4800 - 5900 * 8 >>MQV = -8800.00 Unfavorable Note-1 SQ = Standard Quantity for Actual output SP = Standard Price per Raw material AQ = Actual Quantiity consumed AP = Actual Price per Raw material

SH = Particulars Direct Labour 2400 X SH 7200 3 = SRL 19.4 7200 AHP 7350 AR 19.5 Labour Rate Variance (LrV) = ( SR - AR ) AHP >>LRV = ( 19.4 - 19.5 ) * >>LRV = -735 Unfavorable 7350 Labour Efficiency Variance (LEV) = ( SH - AHW) SR >>LEV = 1 7200 - 7350 ) * 19.4 >>LEV = -2910 Unfavorable Note-1 SH = Standard Hours per Actual Output SR = Standard Rate per Hour AHP = Actual Hours Paid AR = Actual Rate per Hour.