Barker Production Company has developed the following standards for one of its p

Question

Barker Production Company has developed the following

standards

for one of its products.

STANDARD VARIABLE COST CARD

One Unit of Product

Materials: 30 square feet $5 per square foot $150.00

Direct labor: 16 hours $7 perh hour 112.00

Variable manufacturing overhead: 16 hours x$5 per hour 80.00

Total standard variable cost per unit $342.00

The company records materials price variances at the time of

purchase. The following activity occurred during the month

of

April:

Materials purchased: Â 80,000 sq. feet at $5.30 per

sq. foot

Materials used: 74,000 square feet

Units produced 2,500 units

Direct labor: Â 42,000 hours at $6.70 per hour

Required:

Prepare an excel spreadsheet that details the

following(

be sure to indicate Favorable or Unfavaorable):

a.Calculate the direct materials price variance

and

provide 1 possible cause of this variance.

b.Calculate the direct materials usage variance

and

provide 1 possible cause of this variance.

c.Calculate the direct labor rate variance and provide

1

possible cause of this variance.

d.Calculate the direct labor efficiency variance

and

provide one possible cause of this vaiance..

Explanation / Answer

a.Calculate the direct materials price variance

direct materials price variance=(5-5.30)*80000 = $24,000 UnFavorable

and

1 possible cause of this variance.

Market pice has been increased

b.Calculate the direct materials usage variance

direct materials usage variance=(2500*30 - 74000)*5 = $5000 favorable

and

1 possible cause of this variance.

The consumption of raw material is declined in compare to standard

c.Calculate the direct labor rate variance

direct labor rate variance=(7-6.70)*42000 =$12600 Favorable

and

1possible cause of this variance.

The wage rate is decreased

d.Calculate the direct labor efficiency variance

direct labor efficiency variance=(16*2500-42000)*7 = $14000 Unfavorable

and

one possible cause of this vaiance

The efficiency of work is declined

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