Exercise 23-7 Nona Inc., which produces a single product, has prepared the follo
ID: 2432823 • Letter: E
Question
Exercise 23-7 Nona Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product Direct materials (8 pounds at $3.60 per pound) $28.80 $33.00 Direct labor (3 hours at $11.00 per hour) During the month of April, the company manufactures 180 units and incurs the following actual costs. Direct materials purchased and used (1,600 pounds) $5,952 $6,054 Direct labor (560 hours) Compute the total, price, and quantity variances for materials and labor. Total materials variance Materials price varance Materials quantity variance Total labor variance Labor price variance Labor quantity variance $Explanation / Answer
Materials Variance:
Actual direct materials cost = $5,952
Actual direct materials used = 1,600 pounds
Standard direct materials allowed = Actual Output * Standard direct materials per unit
Standard direct materials allowed = 180 units * 8 pounds per unit
Standard direct materials allowed = 1,440 pounds
Standard direct materials cost per pound = $3.60
Standard direct materials cost = Standard direct materials cost per pound * Standard direct materials allowed
Standard direct materials cost = 1,440 * $3.60
Standard direct materials cost = $5,184
Total Materials Variance = Actual direct materials cost - Standard direct materials cost
Total Materials Variance = $5,952 - $5,184
Total Materials Variance = $768 Unfavorable
Materials Price Variance = Actual direct materials cost - Actual direct materials used * Standard direct materials cost per pound
Materials Price Variance = $5,952 - 1,600 * $3.60
Materials Price Variance = $192 Unfavorable
Materials Quantity Variance = Actual direct materials used * Standard direct materials cost per pound - Standard direct materials cost
Materials Quantity Variance = 1,600 * $3.60 - $5,184
Materials Quantity Variance = $576 Unfavorable
Labor Variance:
Actual direct labor cost = $6,054
Actual direct labor hours = 560
Standard direct labor hours allowed = Actual Output * Standard direct labor hours per unit
Standard direct labor hours allowed = 180 units * 3 hours per unit
Standard direct labor hours allowed = 540
Standard direct labor rate per hour = $11.00
Standard direct labor cost = Standard direct labor rate per hour * Standard direct labor cost allowed
Standard direct labor cost = 540 * $11.00
Standard direct labor cost = $5,940
Total Labor Variance = Actual direct labor cost - Standard direct labor cost
Total Labor Variance = $6,054 - $5,940
Total Labor Variance = $114 Unfavorable
Labor Rate Variance = Actual direct labor cost - Actual direct labor hours * Standard direct labor rate per hour
Labor Rate Variance = $6,054 - 560 * $11.00
Labor Rate Variance = $106 Favorable
Labor Efficiency Variance = Actual direct labor hours used * Standard direct labor rate per hour - Standard direct labor cost
Labor Efficiency Variance = 560 * $11.00 - $5,940
Labor Efficiency Variance = $220 Unfavorable
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