Ayala Corporation accumulates the following data relative to jobs started and fi

Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014.

Costs and Production Data Actual Standard Raw materials unit cost $3.60 $3.44 Raw materials units used 11,000 10,600 Direct labor payroll $160,500 $153,153 Direct labor hours worked 15,000 15,300 Manufacturing overhead incurred $201,019 Manufacturing overhead applied $203,949 Machine hours expected to be used at normal capacity 43,000 Budgeted fixed overhead for June $51,600 Variable overhead rate per machine hour $3.10 Fixed overhead rate per machine hour $1.20
Overhead is applied on the basis of standard machine hours. 3.10 hours of machine time are required for each direct labor hour. The jobs were sold for $455,000. Selling and administrative expenses were $42,400. Assume that the amount of raw materials purchased equaled the amount used. Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014.

Costs and Production Data Actual Standard Raw materials unit cost $3.60 $3.44 Raw materials units used 11,000 10,600 Direct labor payroll $160,500 $153,153 Direct labor hours worked 15,000 15,300 Manufacturing overhead incurred $201,019 Manufacturing overhead applied $203,949 Machine hours expected to be used at normal capacity 43,000 Budgeted fixed overhead for June $51,600 Variable overhead rate per machine hour $3.10 Fixed overhead rate per machine hour $1.20
Overhead is applied on the basis of standard machine hours. 3.10 hours of machine time are required for each direct labor hour. The jobs were sold for $455,000. Selling and administrative expenses were $42,400. Assume that the amount of raw materials purchased equaled the amount used. Costs and Production Data Actual Standard Problem 25-2A (Part Level Submission) Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014.

Costs and Production Data Actual Standard Raw materials unit cost $3.60 $3.44 Raw materials units used 11,000 10,600 Direct labor payroll $160,500 $153,153 Direct labor hours worked 15,000 15,300 Manufacturing overhead incurred $201,019 Manufacturing overhead applied $203,949 Machine hours expected to be used at normal capacity 43,000 Budgeted fixed overhead for June $51,600 Variable overhead rate per machine hour $3.10 Fixed overhead rate per machine hour $1.20
Overhead is applied on the basis of standard machine hours. 3.10 hours of machine time are required for each direct labor hour. The jobs were sold for $455,000. Selling and administrative expenses were $42,400. Assume that the amount of raw materials purchased equaled the amount used. (a) Compute all of the variances for (1) direct materials and (2) direct labor.

Total materials variance $ Materials price variance $ Materials quantity variance $ Total labor variance $ Labor price variance $ Labor quantity variance $




Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014. Overhead is applied on the basis of standard machine hours. 3.10 hours of machine time are required for each direct labor hour. The jobs were sold for $455,000. Selling and administrative expenses were $42,400. Assume that the amount of raw materials purchased equaled the amount used. Compute all of the variances for (1) direct materials and (2) direct labor.

Explanation / Answer

Hi,

Please find the answer as follows:

Direct Material Price Variance = Actual Quantity of Material Purchased*(Actual Rate - Standard Rate) = 11000*(3.60 - 3.44) = 1760 (Unfavorable)

Direct Material Quantity Variance = Standard Rate*(Actual Quantity of Material Used - Standard Quantity of Material Used for Actual Production) = 3.44*(11000 - 10600) = 1376 (Unfavorable)

Total Material Variance = Direct Material Price Variance + Direct Material Quantity Variance = 1760 + 1376 = 3136 (Unfavorable)

-----------------------------------------------

Labor Rate Variance = Actual Hours *(Actual Rate - Standard Rate) = 15000*(160500/15000 - 153153/15300) = 10350 (Unfavorable)

Labor Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours) = 153153/15300*(15000 - 15300) = 3003 (Favorable)

Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance = 10350 + (- 3003) = 7347 (Unfavorable)

Thanks.

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