The following information describes production activities of Truzor Manufacturin
ID: 2382205 • Letter: T
Question
The following information describes production activities of Truzor Manufacturing for the year:
Budgeted standards for each unit produced are .40 pounds of raw material at $3.65 per pound and 10 minutes of direct labor at $14.50 per hour.
Compute the direct materials price and quantity variances.(Input all amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response)
Compute the direct labor rate and efficiency variances. (Input all amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response)
The following information describes production activities of Truzor Manufacturing for the year:
Explanation / Answer
Direct materials price variance (MPV) formula: [Materials Price Variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price)] ie MPV= (22000*$3.55) - (22000*$3.65) = $(2200) = $2200F.....Ans(a) Materials quantity variance (MQV) Formula: [Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard Price)] ie MQV = (22000*$3.65) - ((44000*0.40)*3.65) = $16060= $16,060U .....Ans (b) Direct Labor Rate Variance (DLRV) Formula: [Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate)] ie DLRV = ($66000) - (4400*$14.50) = $2200 = $2200U.......Ans (c) Formula of labor efficiency variance (LEV) : [Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate)] ie LEV = (4400*$14.50) - ((44000*10/60)*$14.50) = $(42,533.33) = $42,533.33F .Ans (d)
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