Ravena Labs., Inc. makes a single product which has the following standards: Dir

Question

Ravena Labs., Inc. makes a single product which has the following standards: Direct Materials 2.5 ounces at $20 per ounce Direct Labor 1.4 hours at $12.50 per hour Var. Manuf. Overhead 1.4 hours at ? per hour Variable Manuf. Overhead is applied on the basis of direct labor hours. The following data are available for October: 3750 units of compound were produced during the month. There were no beginning direct materials inventory The ending direct materials inventory was 2000 ounces Direct materials purchased: 12000 ounces for $225,000 Direct labor hours worked: 5600 hours at a cost of $67,200 Variable Manufacturing Overhead costs incurred amounted to $18,200 Variable manufacturing overhead applied to products: $18,375 What is the direct materials price variance and the direct materials quantity variance?

Explanation / Answer

Ans a Material Price Variance (at the time of purchase) Actual quantity*(Actual Rate-Standard Rate) 12000*(18.75-20) -15000 F Actual rate 225000/12000 18.75 Material Price Variance (at the time of usage) Actual quantity*(Actual Rate-Standard Rate) 10000*(18.75-20) -$12500 F Material quantity Variance Standard rate*(Actual Qty-Standard Qty for actual output) 20*(10000-9375) $12500 U Standard Qty for actual output 3750*2.5 9375

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