Beakins Company produces a single product. The standard cost card for the follow

Question

Beakins Company produces a single product. The standard cost card for the follows: During a recent period the company produced 1.200 units of product. Various costs associated with the production of these units are given below: The company records all variances at the earliest possible point in time. Variable manufacturing overhead costs are applied to products on the basis of direct labor Required: Calculate the following The materials Price variance The materials quantity variance The labor rate variance The labor efficiency variance

Explanation / Answer

Direct Material price variance = (Standard price-Actual price)*Actual quantity

= ($5-(28500/6000))*6000

= (5-4.75)*6000

= 1500 Favorable

Direct Material Quantity variance = (Standard Quantity – Actual Quantity)*Standard price

= ((1200*4)-6000)*$5 = 1200 * 5 = 6000 Unfavorable

Direct Labor rate variance = (Standard rate-Actual rate)*Actual quantity

= ($10-(17850/2100))*2100

= ($10 – $8.5)*2100

= 1.5*2100

= $3,150 Favorable

Direct Labor Efficiency variance = (Standard Hours-Actual Hours)*Standard rate

= ((1200*1.5)-2100)*$10

= 300*10

= 3000 Unfavorable

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