The normal capacity of the Malloy Company is 20,000 direct labor hours and 10,00

Question

The normal capacity of the Malloy Company is 20,000 direct labor hours and 10,000 units per month. A finished unit requires 15 pounds of materials at an estimated cost of $1.00 per pound. The estimated cost of labor is $12.00 per hour. It is estimated that overhead for a month will be $15,000. During the month of June, 19,000 direct labor hours were worked at an average rate of $11.50 an hour. The number of units produced was 9,000, using 132,000 pounds of material at a cost of $1.05 per pound. (1) Compute the materials price and quantity variances. (2) Compute the labor rate and efficiency variances.

Explanation / Answer

Particulars Standard Actual Qty Rate amount Qty Rate amount Materials         135,000.00                      1.00         135,000.00         132,000.00                      1.05         138,600.00 Labour            18,000.00                    12.00         216,000.00            19,000.00                    11.50         218,500.00 Actual output              9,000.00 Materials reqd(9,000*15)         135,000.00 Labour hrs reqd(20,000/10,000 * 9,000)            18,000.00 DMPV = (SP-AP)*AQ DMPV = (1 - 1.05)132,000 DMPV = 6,600 U DMQV= (SQ-AQ)SP DMQV= (135,000 - 132,000)1 DMQV= 3,000 F DLRV= (SR-AR)AH DLRV= (12- 11.50)19,000 DLRV= 9,500 F DLEV = (SH-AH)SR DLEV = (18,000 - 19,000)12 DLEV = 12,000 U

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