The following data pertain to the first week of operationsduring the month of ju
ID: 2433361 • Letter: T
Question
The following data pertain to the first week of operationsduring the month of june:
Materials: actualpurchases 1500 units at Rs.3.80 per unit
Actualusage 1350 units
Standardusage 1020 units at Rs.4.00 per unit
Directlabour: actualhours 310 hours at Rs.12.10 per hour
Standardhours 340 hours at Rs.1.00 per hour
Required: compute thefollowing variance indicating whether the variances are favorableor unfavorable:
(i) Materials purchase price variance price usage variance, andquantity variance.
(ii) Labour rate efficiency variance.
Explanation / Answer
Materials purchase pricevariance Difference between what is paid for a given quantity ofmaterials and what should have been paid, multiplied by the actualquantity of materials used:Materials price variance = (actual price - standard price) xactual quantity =(Rs.3.80 - Rs.4.00) x 1500 units = - Rs.300 (F) Material price Usage variance material usage variance is the difference betweenthe standard quantity of materials that should have been used forthe number of units actually produced, and the actual quantity ofmaterials used, valued at the standard cost per unit ofmaterial Materials price usagevariance = (standardusage - actual usage) x standardcost = (1020units - 1350 units) x 4.00 = - Rs. 1,320 (U) Labour rate efficiencyvariance Difference between the amount of labor time that should havebeen used and the labor that was actually used, multiplied by the standard rate. your actual and statndardrate differs too much (Actual .... 12.10 per hour And Standard ....1.00 per hour ) check and replace with the correct figure) I assume standard as 12.00 Labour rate efficiencyvariance = (standard hours - actual hours ) x standard rate = (340 - 310 ) x 12.00 = Rs. 360 (F) material usage variance is the difference betweenthe standard quantity of materials that should have been used forthe number of units actually produced, and the actual quantity ofmaterials used, valued at the standard cost per unit ofmaterial Materials price usagevariance = (standardusage - actual usage) x standardcost = (1020units - 1350 units) x 4.00 = - Rs. 1,320 (U) Labour rate efficiencyvariance Difference between the amount of labor time that should havebeen used and the labor that was actually used, multiplied by the standard rate. your actual and statndardrate differs too much (Actual .... 12.10 per hour And Standard ....1.00 per hour ) check and replace with the correct figure) I assume standard as 12.00 Labour rate efficiencyvariance = (standard hours - actual hours ) x standard rate = (340 - 310 ) x 12.00 = Rs. 360 (F) Materials price usagevariance = (standardusage - actual usage) x standardcost = (1020units - 1350 units) x 4.00 = - Rs. 1,320 (U) Labour rate efficiencyvariance Difference between the amount of labor time that should havebeen used and the labor that was actually used, multiplied by the standard rate. your actual and statndardrate differs too much (Actual .... 12.10 per hour And Standard ....1.00 per hour ) check and replace with the correct figure) I assume standard as 12.00 Labour rate efficiencyvariance = (standard hours - actual hours ) x standard rate = (340 - 310 ) x 12.00 = Rs. 360 (F)
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