Levine Inc., which produces a single product, has prepared the following standar

Question

Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product.
Direct materials (6 pounds at $1.60 per pound) $9.60 Direct labor (3 hours at $11.00 per hour) $33.00
During the month of April, the company manufactures 180 units and incurs the following actual costs.
Direct materials purchased and used (2,400 pounds) $4,320 Direct labor (560 hours) $6,048
Compute the total, price, and quantity variances for materials and labor.
Total materials variance $

UnfavorableFavorableNeither favorable nor unfavorable

Materials price variance $

Neither favorable nor unfavorableFavorableUnfavorable

Materials quantity variance $

Neither favorable nor unfavorableUnfavorableFavorable

Total labor variance $

FavorableUnfavorableNeither favorable nor unfavorable

Labor price variance $

Neither favorable nor unfavorableFavorableUnfavorable

Labor quantity variance $

UnfavorableNeither favorable nor unfavorableFavorable

Explanation / Answer

1.Total material variance=SP *SQ-AP*AQ

SP=Standard price

SQ=Standard quantity

AP=Actual price

AQ=Actual quantity

Actual material price per pound=Total material cost/Total material quantity=4320/2400=1.8 per pound

Actual price =1.8

Total material variance=1.6 *1080-1.8*2400=-2592 U

Standard quantity=Standard pounds used per unit * Quantity produced=6*180=1080 pounds

2. Material price variance=Actual quantity * Actual price-Actual quantity *Standard price

Material price variance=2400*1.8-2400*1.6=480 U

3. Material quantity variance=Actual quantity * Standard price –Standard quantity *Standard price

    Material quantity variance=2400*1.6-1080*1.8=1896 U

4. Total labour variance=Standard rate * Standard hours-Actual rate * Actual hours

Standard hours=Standard hour required in one unit *Number of units =3*180=540 hours

Actual hours=560 hours

Standard rate=$11 per hour

Actual rate=Total labour cost/Actual number of hours=6048/560=10.8

Total labour variance=11*540-10.8*560=-108 U

5. Labour quantity variance=Standard hours * Standard rate –Actual hours *Standard rate

Labour quantity variance=540*11-560*11=-220   U

6. Labour price variance=Actual hours*Standard rate-Actual hours*Actual rate

Labour price variance=560*11-560*10.8=112 F

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