New Jersey Valve Company manufactured 9,000 units during January of a control va
ID: 2437386 • Letter: N
Question
New Jersey Valve Company manufactured 9,000 units during January of a control valve used by milk processors in its Camden plant. Records indicated the following:
Direct labor 36,900 hr. at $13.60 per hr.
Direct material purchased 30,000 lb. at $2.70 per lb.
Direct material used 25,900 lb.
The control valve has the following standard prime costs: Direct material 3 lb. at $2.60 per lb. $ 7.80 Direct labor 4 hr. at $14.00 per hr. 56.00 Standard prime cost per unit $ 63.80 Required:
A - Prepare a schedule of standard production costs for January, based on actual production of 9,000 units.
B - For the month of January, compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" for no effect)
Direct Material Price Variance:
Direct Material Quantity Variance:
Direct Material Purchase Price Variance:
Direct Labor Rate Variance:
Direct Labor Efficiency Variance:
Explanation / Answer
Answer
Standard DATA for
9000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material
27000 [9000 units x 3 lbs]
$ 2.60
$ 70,200.00
Direct labor
36000 [9000 units x 4 hrs]
$ 14.00
$ 504,000.00
TOTAL STANDARD COST
$ 574,200
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quantity
(
$ 2.60
-
$ 2.70
)
x
25900
-2590
Variance
$ 2,590.00
Unfavourable-U
Material Quantity Variance
(
Standard Quantity
-
Actual Quantity
)
x
Standard Rate
(
27000
-
25900
)
x
$ 2.60
2860
Variance
$ 2,860.00
Favourable-F
Material Purchase Price Variance
(
Standard Rate
-
Actual Rate
)
x
Purchase Quantity
(
$ 2.60
-
$ 2.70
)
x
30000
-3000
Variance
$ 3,000.00
Unfavourable-U
Labor Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 14.00
-
$ 13.60
)
x
36900
14760
Variance
$ 14,760.00
Favourable-F
Labour Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
36000
-
36900
)
x
$ 14.00
-12600
Variance
$ 12,600.00
Unfavourable-U
Standard DATA for
9000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material
27000 [9000 units x 3 lbs]
$ 2.60
$ 70,200.00
Direct labor
36000 [9000 units x 4 hrs]
$ 14.00
$ 504,000.00
TOTAL STANDARD COST
$ 574,200
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