Quicksilver Compnay has set the follwoing standards for one unit of product: Dir

Question

Quicksilver Compnay has set the follwoing standards for one unit of product:

Direct material

Quantity: 6.2 lbs per unit

Price per lb: $11 per lb

Direct Labor

Quantity: 6 hrs per unit

Rate per hr: $23 per hr

Actual costs incurred in the production of 2,800 units were as follows:

Direct material: $194,350 ($11.50 per lb)

Direct labor: $393,750 ($22.50 per hr)

All Materials purchased were consumed during the period.

Required:

Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

Explanation / Answer

Please find the answer as follows:

Direct Material Price Variance = Actual Quantity of Material Purchased *(Actual Rate - Standard Rate) = 194350/11.50*(11.50 - 11) = 8450 (Unfavorable)

Direct Material Quantity Variance = Standard Rate*(Actual Quantity of Material Used - Standard Quantity of Material Used for Actual Production) = 11*(194350/11.50 - 2800*6.2) = 5060 (Favorable)

Labor Rate Variance = Actual Hours *(Actual Rate - Standard Rate) = 393750/22.50*(22.50 - 23) = 8750 (Favorable)

Labor Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours) = 23*(393750/22.50 - 6*2800) = 16100 (Unfavorable)

Thanks.

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