Gulf Production manufactures recycle bins using recycled plastic that it sells t
ID: 2474192 • Letter: G
Question
Gulf Production manufactures recycle bins using recycled plastic that it sells to municipal governments. It has developed the following per unit standard costs for 2014 for each bine:
Direct Materials Direct Labor Manufacturing Overhead
Standard quantity 3 pounds ½ hour ½ hour
Standard price $0.80 $12.00 $4.50
Unit standard cost $2.40 $6.00 $2.25
In 2014, the company planned to produce 40,000 bins at a level of 20,000 hours of direct labor. Actual results for 2014 are presented below:
1. Direct materials purchased and used were 116,000 pounds of plastic that cost $98,600.
2. Direct labor costs were $258,300 for 21,000 direct labor hours actually worked.
3. Total manufacturing overhead was $88,000.
4. Actual production was 40,200 bins.
Instructions
Compute the following variances: (Be sure to indicate if it is favorable or unfavorable)
1. Direct materials price
2. Direct materials quantity
3. Direct labor price
4. Direct labor quantity
Explanation / Answer
Answer for question no.1:
Formula for Direct material price variance =Actual quanity*(Standard price- Actual price)
Given actual quantity =116,000 pounds.
Actual price=$98.600/116000
=0.85
Standard Price =$0.80
Substituting the values in the formula=116,000*($0.80-$0.85)
=116,000*-0.05
=$5,800(U).
Answer for question no.2:
Formula for direct materials usagae variance = Standard price*(Standard quantity-Actual quantity)
Given standard price =0.80 perr pound
Actual quantity =116,000 pounds.
Actual production =40,200 units
Standard quantity required for producing 40,200 units=40,200*3 pounds
=120600 pounds.
Substituting the values in the formula =0.80(120600-116,000)
=0.80*4,600
=$3,680(F).
Answer for question no.3:
Formula for direct labour price variance= Actual hours*(Standard price-Actual price)
Given actual hours =21,000 hours.
Standard price= $12 per hour.
Actual price=$258300.
Substituting the values in the formula =21000*12-$258,300
=$252,000-$258,300.
=6,300(U).
Answer for question no.4:
Formula for direct labour quantity variance=Standard price per hour*(standard hours for actual quantity - Actual quantity)
Given standard price=$12.
Standard hours for acutal quantity=40,200*0.50
=20,100 hours.
Substituting the values in the formula = $12*(20,100 - 21,000)
=$12*-900
=10,800(U).
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.