Question

Saskatawan Can Company manufactures recyclable soft drink cans. A unit of production is a case of 12 dozen Can The following standaris hanchen set by the paduction-engineering Maff and the controller. Exercise 10-22 Straightforward Computation of Variances (LO 10-1, 103) Direct laber Quantity. 25 hour Rale, Slo per hour Direct material: Quantity, 4 kilogrunts Price, S.80 per kilogram Actual material purchases amounted to 240.000 kilograms at 5.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows: Direct labor Direct material: $211.90 for 13.000 hours S170.100 for 210,000 kilograms Requlred: 1. Use the variance formulas to compute the direct-material price and quantity variances, the direct- material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. 2. Build a spreadshed: Construct an Excel spreadsheet to solve the preceding requirement. Show how the solution will change if the following information changes: the standard direct-labor rate is S15 per hour and the standard direct-material price is $ 79 rer kilogram

Answer 1

Direct Labour
Quantity	0.25 Hr
Rate	$16 / Hr
Direct Material
Quantity	4 Kilogram
Price	$0.80 per Kg
Actual material purchased 240,000 Kg @ $0.81 per Kg
Actual cost incurred=50,000 units
Direct Labour $ 211900 for 13000 Hrs
Direct Material $ 170100 for 210000 Kg
Direct Material Price variance
Direct Material $ 170100 for 210000 Kg
Rate
Standard Quantity allowed
Actual cost incurred=50,000 units-a	50,000
Quantity- b	4 Kilogram
Standard Quantity allowed (a*b)	2,00,000	Kg
Standard price
Price $ / Kg	0.8
Actual used	2,10,000	Kg
Actual Quantity purchased	2,40,000	Kg
Actual Price per Kg $/ Kg	0.81
Direct Material Price variance
Actual used - A	2,10,000	Kg
Standard Price $ / Kg	0.8
Actual Price per Kg $/ Kg	0.81
Direct Material Price variance	210000*(0.8-0.81)
Direct Material Price variance $	-2,100	Unfavorable
Direct Material Quantity variance $
Standard Price $ / Kg	0.8
Standard Quantity allowed	2,00,000	KG
Actual used	2,10,000	KG
Direct Material Quantity variance $	0.8*(200000-210000)
Direct Material Quantity variance $	-8,000	Unfavorable
Direct Material Purchase price variance $
Actual Quantity purchased	2,40,000	KG
Standard Price $ / Kg	0.800
Actual Price per Kg $/ Kg	0.810
Direct Material Purchase price variance $	240000*(0.8-0.81)
Direct Material Purchase price variance $	-2,400	Unfavorable

Actual cost incurred=50,000 units-a	50,000
Quantity- b Hr	0.25
Standard Labour Hrs allowed (a*b)	12,500	Hrs
Standard price per Hr $/ hr	16.00
Actual Labour Hrs	13,000	Hrs
Actual rate per Hr $/ hr (211900/13000)	16.30
Labour rate Variance
Actual Hrs -	13,000	Hrs
Standard rate $ / hr	16.0
Actual rate $ / hr	16.30
Labour rate Variance	13000*(16-16.3)
Labour rate Variance $	-3,900	Unfavorable
Labour Efficiency Variance
Standard rate $ / hr	16.0
Standard Hrs	12,500
Actual Hrs -	13,000
Labour Efficiency Variance $	16*(12500-13000)
Labour Efficiency Variance $	-8,000	Unfavorable