Question

1.A company produces widgets with budgeted standard direct materials of 2 pounds per widget at $5 per pound. Standard direct labor was budgeted at 0.5 hour per widget at $15 per hour. The actual usage in the current year was 25,000 pounds (an actual cost of $4.75 per pound) and 3,000 hours (an actual rate of $17 per pound )to produce 10,000 widgets. What was the direct labor usage variance?

A. $30,000 favorable. B. $25,000 favorable. C. $25,000 unfavorable. D. $30,000 unfavorable.

2. The standard direct material cost to produce a unit of Lem is 4 meters of material at $2.50 per meter. During May of the current year, 4,200 meters of material costing $10,080 were purchased and used to produce 1,000 units of Lem. What was the material price variance for May?

a.$80 unfavorable b. 420 favorable c.420 favorable d. 500 favorable e.500 unfavorable

Answer 1

Answers

• All working forms part of the answer
• Requirement 1

Correct Answer = Option ‘A’ $ 30000 favourable

Labour Efficiency Variance
(	Standard Hours = 10000 units x 0.5hrs	-	Actual Hours	)	x	Standard Rate
(	5000	-	3000	)	x	$                        15.00
	30000
	Variance		$            30,000.00			Favourable-F

• Requirement 2

Correct Answer = Option ‘B’ $ 420 Favourable

Material Price Variance
(	Standard Rate	-	Actual Rate = $ 10080 / 4200 meters	)	x	Actual Quantity
(	$                        2.50	-	$                       2.40	)	x	4200
	420
	Variance		$                  420.00			Favourable-F