Question

Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. $15.00 $65.00 Direct materials (10 pounds at $1.50 per pound) Direct labor (5 hours at $13.00 per hour) During the month of April, the company manufactures 180 units and incurs the following actual costs. Direct materials purchased and used (2,500 pounds) $4,250 $11,904 Direct labor (930 hours) Compute the total, price, and quantity variances for materials and labor. Total materials variance Materials price variance Materials quantity variance Total labor variance Labor price variance Labor quantity variance Neither favorable nor unfavorable Favorable Unfavorable s

Identify if favorable, unfavorable or neither for all of them.

Answer 1

Answer

• All working forms part of the answer
• Data for calculation

Actual DATA for		180	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	2500	$              1.70 [4250 / 2500]	$             4,250.00
Direct labor	930	$              12.80 [11904/930]	$           11,904.00

Standard DATA for		180	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 10 pounds x 180 units)=1800 pounds	$                   1.50	$         2,700.00
Direct labor	( 5 hours x 180 units)=900 hours	$                13.00	$       11,700.00

• Answers, in sequential order, as asked

Total Materials Variance
(	Standard Cost	-	Actual Cost	)
(	$               2,700.00	-	$              4,250.00	)
	-1550
	Variance		$              1,550.00			Unfavourable-U

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        1.50	-	$                       1.70	)	x	2500
	-500
	Variance		$                  500.00			Unfavourable-U

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	1800	-	2500	)	x	$                           1.50
	-1050
	Variance		$              1,050.00			Unfavourable-U

Total Labor Variance
(	Standard Cost	-	Actual Cost	)
(	$             11,700.00	-	$            11,904.00	)
	-204
	Variance		$                  204.00			Unfavourable-U

Labor Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     13.00	-	$                    12.80	)	x	930
	186
	Variance		$                  186.00			Favourable-F

Labour Quantity Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	900	-	930	)	x	$                        13.00
	-390
	Variance		$                  390.00			Unfavourable-U