Problem 2 Material and Labour Variances The direct materials and direct labour s

Question

Problem 2 Material and Labour Variances The direct materials and direct labour standards for one bottle of Whisper perfume, a product of the Farante Company, are given below: Standard Quantity Standard Price $2.50 per gram Standard Cost or Hours or Rate $18.00 $4.00 7.2 grams Direct materials Direct labour 0.4 hours$10.00 per hour During the most recent month, the following activity was recorded: a. Twenty thousand grams of material were purchased at a cost of $2.40 per gram. b. All of the material was used to produce 2,500 bottles of Whisper. c. Nine hundred hours of direct labour time were recorded at a total labour cost of $10,800. Required: 1. Compute the direct materials price and quantity variances for the month. 2. Compute the direct labour rate and efficiency variances for the month.

Explanation / Answer

Answer

1 ) material price variance = 10000 * ( 2.40 - 2.50 )

= 1000 favorable

material quantity variance = 2.50 ( 10000 - 2500 * 7.2 )

= 20000 favorable

2 ) labour rate variance = 10800 - ( 900 * 10 )

= 1800 unfavorable

labour efficiency variance = 10 ( 900 - 2500 * 0.4 )

= 10000 favorable

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