Banner Company manufactures flags of various countries. Each flag has a standard

Question

Banner Company manufactures flags of various countries. Each flag has a standard of 8 square feet of fabric and 3 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 1. Compute the materials price variance and the materials quantity variance. 2. Compute the labor rate variance and the labor efficiency variance.

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Direct Materials Price Variance = 32080*(4.50 - 4.25) = 8020 U

Direct Materials Quantity Variance = 4.25*(32080 - 8*4000) = 340 (U)

Part B:

Direct Labor Rate Variance = 11940*(10.20 - 10) = 2388 U

Direct Labor Efficiency Variance = 10*(11940 - 4000*3) = 600 F

Thanks.

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