The following information describes production activities of the Central Corp.:
ID: 2363183 • Letter: T
Question
The following information describes production activities of the Central Corp.:
Raw materials used 16,000 lbs at $4.05 per pound
Factory payroll 5,545 hours for a total of $72,085
30,000 units were completed during the year
Budgeted standards for each unit produced:
1/2 lb. of raw material at $4.15 per lb.
10 minutes of direct labor at $12.50 per hour
Compute the direct materials price and quantity and the direct labor rate and efficiency variances. Indicate
whether each variance is favorable or unfavorable.
Explanation / Answer
30,000 units @ 1/2 pound per = 15,000 pounds raw material actually used in product. 15,000 pounds material budgeted @ $4.15 per pound = $62,250 total budgeted for material. 16,000 actual pounds of material used @ $4.05 = $64,800 actual material cost. $64,800 actual - $62,250 budgeted = $2,550 variance. (1,000 pounds lost/wasted @ $4.05 per pound would = $4050 variance on material, so you actually did better than it initially looks.) $72,085 labor for 5,545 hours = $13 per hour. $12.50 labor budgeted so $.50 per hour variance on labor costs. 10 minutes of labor per unit produced at $12.50 per hour of labor would equal $62,500 total labor budgeted. Total labor variance = $9,585 Material budgeted = 15,000 pounds. Material used = 16,000 Variance = 1,000 pounds. 1,000 pounds is 6.66% of 15,000 pounds. $2,550 variance on material cost = 3.93% Labor budgeted = $62,500 Labor actual = $72,085 Variance = $9,585 $9,585 is 15.336% of $62,500 All variances are not in favor of profit.
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