1. The standard cost of Product 245 manufactured by Albert Industries includes2
ID: 2340752 • Letter: 1
Question
1. The standard cost of Product 245 manufactured by Albert Industries includes2 pounds of direct materials at RM4.00 per pound. During September, 40,000 pounds of direct materials are purchased at a cost of RM3.85 per pound, and all of the direct materials are used to produce 19,000 units of Product 245. Instruction Compute the materials price and quantity variances (5 marks) 2. Aztec, Inc.'s standard labor cost of producing one unit of product is 2 hours at the rate of RM14.00 per hour. During February, 52,000 hours of labor are incurred at a cost of RM13.80 per hour to produce 25,000 units of product. Instruction Compute the labor price and labor quantity variances. (5 marks)Explanation / Answer
1 Direct Materials Price Variance (SP-AP)*AQ Direct Material Quantity Variance (SQ-AQ)*SP Total direct materials variance (SP*SQ)-(AP*AQ) Units produced 19000 Standard quantity for these units (2 pounds for each unit) (SQ) 38000 Actual quantity (AQ) 40000 Standard price (SP) 4 Actual price (AP) 3.85 Direct Materials Price Variance = (4-3.85)*40000 6000 Direct Materials Quantity Varaince = (38000-40000)*4 -8000 Total direct materials variance = (4*38000)-(3.85*40000) -2000 2 Direct Labor Price Variance (SR-AR)*AH Direct labor Quantity Variance (SH-AH)*SR Total direct labor variance (SR*SH)-(AR*AH) Units produced 25000 Standard Hours for these units (2 pounds for each unit) (SH) 50000 Actual Hours (AH) 52000 Standard Rate (SR) 14 Actual Rate (AR) 13.8 Direct Labor Price Variance = (14-13.8)*52000 10400 Direct Labor Quantity Varaince = (50000-52000)*14 -28000 Total direct Labor variance = (14*50000)-(13.8*52000) -17600
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