Last year. Dionne company budgeted for production and sale of 5780 gizmos. Actua

Question

Last year. Dionne company budgeted for production and sale of 5780 gizmos. Actual production and sales was 6800 gizmos for $672 each. Each item was budgeted to use 6 direct labor hour(s) and 7 cubic inch(s) of material. Dionne expected to pay S4.00 per cubic inch and $14.00 per hour. Dionne does not keep any raw materials inventory. Actual production required the following: 54740 cubic inches at $4.80 per cubic inch 46920 hours at $15.40 per hour Compute and label each of the following variances. If a variance is 0 (zero), label it as Favorable. Materials price variance = Favorable or unfavorable? (Type F or U) Materials usage variance = Favorable or unfavorable? (Type F or U) Labor rate variance = Favorable or unfavorable? (Type F or U) Labor efficiency variance = Favorable or unfavorable? (Type F or U)

Explanation / Answer

Solution:

Working Note:

Calculation of budgeted material & direct labor hours required for 5,780 gizmos:

Each item budgeted to use 7 cubic inchs of material then 6,800 gizmos = 6,800 * 7 = 47,600 cubic inchs

Each item budgeted to use 6 direct labor hrs then 6,800 gizmos = 6,800 * 6 = 40,800 hours

1) Material Price Variance:

= Actual Quantity * (Standard Price - Actual Price)

= 54,740 * (4.00 - 4.80)

= 43,792 U

2) Materials Usage Variance:

= Standard Price * (Standard Quantity - Actual Quantity)

= 4.00 * (47,600 - 54,740)

= 28560 U

3) Labor Rate Variance:

= Actual Time * (Standard Rate - Actual Rate)

= 46,920 * (14.00 - 15.40)

= 65,688 U

4) Labor Efficiency Variance:

= Standard Rate * (Standard Time - Actual Time)

= 14.00 * (40,800 - 46,920)

= 85,680 U

Budgeted Actuals Direct Material       47,600    54,740 Per Pound 4 4.8 Direct Labor       40,800    46,920 Per Hr 14 15.4

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.