Question

Talia Company produces a single product. The company has set standards as follows for materials and labour:

	Direct Materials	Direct Labour
Standard quantity or hours per unit	? kilograms		1.25 hours
Standard price or rate.	? per kilogram	$	10 per hour
Standard cost per unit	?	$	11.25

During the past month, the company purchased 3,000 kilograms of direct materials at a cost of $8,250. All of this material was used in the production of 700 units of product. Direct labour cost totalled $6,825 for the month. The following variances have been computed:

Materials quantity variance	$	600	U
Total materials variance	$	150	F
Labour efficiency variance	$	2,250	F
Required: 1. Compute the following for direct labour. a. b. C. Standard price per kilogram for materials. Standard quantity allowed for materials for the month's production Standard quantity of materials allowed per unit of product. kgs. kgs per unit. 2. Compute the following for materials price variance. (Round your answers to 2 decimal places.) a. Actual direct labour cost per hour for the month b. Labour rate variance

Answer 1

a)	materials quantity variance				600	U
	total materials variance				150	F
	materials price variance				750	F
	materials price variance
	(actual price - standard price)*AQ
	(8,250       - 3000*x)=		750
	(750+8250)/3000
	3
	materials quantity variance
	(AQ -SQ)*SP
	(3000 - 700*x)*3=		600
	9000 -2100x =		600
	x =	(9000-600)/2100
		4
	a.	Standard price per kilogram for materials						3
	b.	standard quantity allowed for materials for the month's production						2800	kgs
	c.	standard quantity of materials allowed per unit of product						4	kgs per unit
b)	labor efficiency variance
	(Ah - sh)*standard price
	(x   - 700*1.25)*10=		2250
	10 x    - 8750   =		2250
	x   =	(8750-2250)/10
		650
	actual direct labor cost per hr for the month					6825/650
						10.5
	labor rate variance
	(actual rate - standard rate)*actual hrs
	(10.5-10)*650
	325	U
	actual direct labor cost per hr for the month					10.5
	labor rate variance					325	U