DM & DL variances Aquatica uses a standard cost system for materials and labor i
ID: 2446176 • Letter: D
Question
DM & DL variances
Aquatica uses a standard cost system for materials and labor in producing small fishing boats. Production requires three materials: fiberglass, paint, and a purchased trim package. The standard costs and quantities for materials and labor are as follows:
The following actual data related to the production of 600 boats was recorded for July:
Calculate the material and labor variances for Aquatica for July. The material price variance should be computed for each type of material and on the quantity of material purchased:
Fiberglass Price Variance:
Fiberglass Quantity Variance:
Paint Price Variance:
Paint Quantity Variance:
Trim Price Variance:
Trim Quantity Variance:
Labor Rate Variance:
Labor Efficiency Variance:
Total Labor Variance:
Explanation / Answer
Fibreglass Price Variance= Actual Cost-Standard Cost
=(21,00,000*$1.83)- (21,00,000*1.80)
= 63,000
Fibreglass Quantity Variance= (Actual Material Used-Standard Material Requirement)*Standard Price
= (13,80,000/600)-2000*($1.80)
=(2300-2000)*1.8
=54,000
Paint price variance = Actual Cost-Standard cost for Actual Purchase
=(1000*$55.50)-(1000*60)
= 55,500-60,000
= (4500)
Note: 4 Quart= 1Gallon
Paint Quantity Variance= Actual Quantity-Standard Quantity
=1000-(600*6/4)*60
= (1000-900)*60
= 60,000
Trim Price Variance= Actual Price-Standard Price for Actual Purchase
= (640*$205)-(640*$200)
= 1,31,200-1,28,000
=3200
Trim Qiuantity Variance= Actual Consumption at Standard price-Standard Consumption at standard price
=(608*$200)-(600*$200)
= 1,21,600-1,20,000
=1600
Labour Rate Variance= (Actual Rate-Standard Rate)*Actual labour used
=($23.5-$25)*23850
=-$1.5*23850
=-35,775
Labour Efficiency Variance= Actual hours*Standard rate-Standard hours*standard rate
=23850*25-24000*25
=-3750
Total Labour Variance = Actual cost-budgeted cost for actual production
=(23850*23.5)-(24000*25)
=560475-6,00,000
=-39525
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