Levine Inc., which produces a single product, has prepared the following standar
ID: 2467544 • Letter: L
Question
Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product.
Direct materials (8 pounds at $2.50 per pound) $20
Direct labor (3 hours at $12.00 per hour) $36
During the month of April, the company manufactures 230 units and incurs the following actual costs.
Direct materials purchased and used (1,900 pounds) $5,035
Direct labor (700 hours) $8,120
Compute the total, price, and quantity variances for materials and labor.
Total materials variance :
Materials price variance :
Materials quantity variance :
Total labor variance :
Labor price variance :
Labor quantity variance :
Explanation / Answer
Total Material variance=Standard price * Standard Quantity –Actual price * Actual Quantity
Material price variance=Actual quantity * actual price –Actual quantity * Standard price
Material quantity variance=Actual quantity * standard price-Standard quantity * standard price
Total labour variance=Standard rate * standard hours-Actual rate * actual hours
Labour price variance=Standard rate * actual hours-Actual rate * Actual hours
Labour quantity variance=Standard rate * standard hours-standard rate* actual hours
1. Total material price
Actual material used=1900 pounds
Actual material cost=$5035
Actual price per pound=5035/1900=2.65
Actual quantity=1900 pounds on 230 units
Material quantity on one unit=1900/230=8.26 pounds
Standard price per pound=2.50
Standard quantity consumed on one unit=8 pounds
Total material variance=2.50*8-2.65*8.26=-1.889 U
2. Material price variance=Actual quantity * actual price –Actual quantity * Standard price
Material price variance=8.26*2.65-8.26*2.5=1.239 U
3. Material quantity variance=Actual quantity * standard price-Standard quantity * standard price
Material quantity variance=8.26*2.5-8*2.5=1.625 U
4. Total labour variance=Standard rate * standard hours-Actual rate * actual hours
Actual labour hours =700
Actual labour cost=8120
Labour rate per hour=8120/700=$11.6
Units produced=230
Labour consumed on one unit =Total labour/Number of units=700/230=3.043 hours per unit
Standard direct labour hour per unit=3 hours
Labour rate per hours=12
Total labour variance=12*3-11.6*3.043=0.7012 F
4. Labour price variance=Standard rate * actual hours-Actual rate * Actual hours
Labour price variance=12*3.043-11.6*3.043=1.2172 F
5. Labour quantity variance=Standard rate * standard hours-standard rate* actual hours
Labour quantity variance=12*3-12*3.043=-.516 U
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