Perez Company adopted a standard cost system several years ago. The standard cos

ID: 2489312 • Letter: P

Question

Perez Company adopted a standard cost system several years ago. The standard costs for the prime costs of its single product follow: Material: 10 kilograms @ $4.50 per kilogram $45.00 Labor: 6 hours @ $8.50 per hour $51.00

(1) Units completed: 5,800 units
(2) Budgeted output: 6,000 units
(3) Materials purchased and used: 60,000 kilograms
(4) Total actual labor costs: $306,600
(5) Actual hours of labor: 36,500 hours
(6) Materials quantity variance: $2,250 unfavorable
(7) Net materials variance: $450 unfavorable

Compute the following:

a. Labor rate variance
b. Labor efficiency variance
c. Actual kilograms of material used in the production process
d. Actual cost paid per kilogram of material

Explanation / Answer

=(8.40 – 8.50)36,500

=3,650(F)

=(36,500 – 6*5,800)8.50

=(36,500 – 34,800)8.50

=14,450(U)

Material qty variance = (Actual qty used – SQ) SR

450 = (x – 10*5,800)4.5

So x = 58,100 hours

=306,600/60,000

=$5.11 per kilogram

Labor rate variance = (AR – SR)AH