Variances for direct materials and direct labor Banner Company manufactures flag

Question

Variances for direct materials and direct labor Banner Company manufactures flags of various countries. Each flag has a standard of eight square feet of fabric and three hours of direct labor time. Information about recent production activity follows. Actual cost of fabric: $4.50 per square foot Fabric consumed: 32,080 square feet Standard price per square foot of fabric: $4.25 Standard direct labor rate: $10.00 per hour Actual direct labor rate: $10.20 per hour Actual labor hours worked: 11,940 Actual production completed: 4,000 flags a. Compute the materials price variance and the materials quantity variance. b. Compute the labor rate variance and the labor efficiency variance.

Explanation / Answer

Material price variance = 32080* (4.5-4.25) = 8020 unfavourable Material quanityt variance = (32080-32000)*4.25 = 340 unfavourable Labour rate variance = 11940*(10-10.2) = 2388 unfavourable Labour efficiency variance = (11940-12000)*10 = 600 favourable Happy to help

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