The Davenport Company\'s budget containns these standards for materials and direct labor for one unit of output:
Material: 5 pounds @ $1 per pound $ 5.00
Labor: 2 hours @ $10 per hour 20.00
Actual production for te month recently ended was 3000 units.
Materials weighing 16,000 pounds were purchased for $18,400. Materials weighing 15,500 were used in production.
Direct labor costs totaled $66,150 for 6,750 hours.
Required:
Calculate the following variances:
1.Materials price variance
2. Materials usage/quantity variance
3. Labor rate variance
4. Labor efficiency variance
Solution
Hi,
Please find the detailed answer as follows:
Direct Material Price Variance = Actual Quantity *(Actual Rate - Standard Rate) = 16000*(18400/16000 - 1) = 2400 (Unfavorable)
Direct Material Quantity Variance = Standard Rate*(Actual Quantity - Standard Quantity used for Actual Production) = 1*(16000 - 3000*5) = 1000 (Unfavorable)
Labor Rate Variance = Actual Hours *(Actual Rate - Standard Rate) = 6750*(66150/6750 - 10) = 1350 (Favorable). You will be required to enter -1350.
Labor Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours used for Actual Production) = 10*(6750 - 3000*2) = 7500 (Unfavorable)
Thanks.
.
General Principles of Intellectual Property: Concepts of Intellectual Proper...
The Davenport Company-'s budget containns these standards for material.docx
1. The Davenport Company's budget containns these standards for materials and direct labor for
one unit of output:
Material: 5 pounds @ $1 per pound $ 5.00
Labor: 2 hours @ $10 per hour 20.00
Actual production for te month recently ended was 3000 units.
Materials weighing 16,000 pounds were purchased for $18,400. Materials weighing 15,500 were
used in production.
Direct labor costs totaled $66,150 for 6,750 hours.
Required:
Calculate the following variances:
1.Materials price variance
2. Materials usage/quantity variance
3. Labor rate variance
4. Labor efficiency variance
Solution
Hi,
Please find the detailed answer as follows:
Direct Material Price Variance = Actual Quantity *(Actual Rate - Standard Rate) =
16000*(18400/16000 - 1) = 2400 (Unfavorable)
2. Direct Material Quantity Variance = Standard Rate*(Actual Quantity - Standard Quantity
used for Actual Production) = 1*(16000 - 3000*5) = 1000 (Unfavorable)
Labor Rate Variance = Actual Hours *(Actual Rate - Standard Rate) = 6750*(66150/6750 - 10)
= 1350 (Favorable). You will be required to enter -1350.
Labor Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours used for Actual
Production) = 10*(6750 - 3000*2) = 7500 (Unfavorable)
Thanks.
