The budget for May called for production of 9,000 units. Actual output for the m

Question

The budget for May called for production of 9,000 units. Actual output for the month was 8,500 units with total direct materials cost of $127,500 and total direct labor cost of $77,775. The direct labor standards call for 45 minutes of direct labor per unit at a cost of $12 per direct labor-hour. The direct materials standards call for one pound of direct materials per unit at a cost of $15 per pound. The actual direct labor-hours were 6,375. Variance analysis of the performance for the month of May would indicate:

Explanation / Answer

Budget

Actual

Per Unit

Total

Per Unit

Total

9000 Units

8500 Units

15

135000

15

127500

12

81000

12.2

77775

Material Price Variance = Actual Quantity * (Standard Price - Actual Price) = 8500 * ( 15 - 15) = 0 (No variance) Direct Labour Rate Variance = Actual Hours Worket * (Standard Rate - Actual Rate) = 6375 * (12 - 12.2) = 6375 *(-0.20) = (1275) Unfavorable

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