Ayala Corporation accumulates the following data relative to jobs started and fi

Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014.

Costs and Production Data

Actual

Standard

Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $483,000. Selling and administrative expenses were $35,400. Assume that the amount of raw materials purchased equaled the amount used.

Compute all of the variances for (1) direct materials and (2) direct labor. (Round answers to 0 decimal places, e.g. 125.)

Costs and Production Data

Actual

Standard

Raw materials unit cost $4.20 $4.06 Raw materials units used 11,200 10,320 Direct labor payroll $177,310 $171,819 Direct labor hours worked 14,900 15,300 Manufacturing overhead incurred $204,390 Manufacturing overhead applied $206,550 Machine hours expected to be used at normal capacity 43,000 Budgeted fixed overhead for June $64,500 Variable overhead rate per machine hour $3.00 Fixed overhead rate per machine hour $1.50

Explanation / Answer

1.Total material variance = (total standard cost - total actual cost ) = 41899.2-47040 = 5141

total standard cost = standard quantity*standard price = 10320*$4.06 =$41899.2

total actual cost = actual quantoity*actual price = 11200*$4.20 = $47040

Material price variance = ( standard price - actual price )*actual quantity

  ($4.06 - $4.2 )*11200= 1568

Material quantity variance =(standard quantity - actual quantity)*standard price

   (10320 - 11200) *4.06 =3573

2. Total labour cost = standard labour cost - actual labour cost

  $171,819 - $177,310 =$5491

Labour price variance = standard labour rate - actual labour rate * actual labour hours

( $171819/15300- $177310/14900) *14900 =$ 9983

Labour quantity variance = standard labour hour - actual labour hour * standard labour rate

  (15300-14900) * $171819/15300 = 4492

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