Please help calculate: Materials Price Variance: Materials Quantity Variance: La

Question

Please help calculate:

Materials Price Variance:

Materials Quantity Variance:

Labor Rate Variance:

Labor efficency Variance:

Chapter 11 Watson Chemical Company produces a chemical used in dry cleaning. Its accounting system uses standard costs. The standards call for 0.70 gallons of material and 0.3 hours of labor per half gallon can of chemical. (i.e., 0.70 gallons of material are needed to produce a 0.5 gallon can of product due to evaporation.) The standard cost per gallon of material is $5.35. The standard cost per hour for labor is $21.50. Overhead is applied at the rate of $8.95 per can Expected production is 18,000 cans with fixed manufacturing overhead costs per year of $35,100, and variable overhead of $6.00 per unit (a half gallon can) During 2017, 18,000 cans were produced; 15,000 gallons of material were purchased at a cost of $87,750; 13,000 gallons of material were used in production. The cost of direct labor incurred in 2017 was $122,000 based on an average actual wage rate of $21.75 per hour Actual overhead for 2017 was $170,000. Calculate the labor variances. Based on Materials Purchased Based on Materials Used Flx Bdgt Materials Actual Amounts Price Total Price Variance Quantity Variance Flx Bdgt Labor Actual Amounts Price Total Rate Variance Efficiency Variance

Explanation / Answer

Material Variance

Actual price per gallon = $87,750/15,000 gallons = $5.85 per gallon

Standard quantity of material required to produce 18,000 cans = 0.70 gallon * 18,000 cans = 12,600 gallons

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

= ($5.35- $5.85) * 15,000 gallons

= -$7,500 (Unfavourable)

(2) Material quantity variance = Standard price * (Standard Quantity - Actual Quantity)

= $5.35 * (12,600 gallons - 13,000 gallons)
= - $2,140 (Unfavourable)

Labor Variance

Actual labor cost per hour = $21.75

Actual labor hours used = $122,000/$21.75 per hour = 5,609.20 hours

Standard labor hours required to produce 18,000 cans = 0.30 hours gallon * 18,000 cans = 5,400 hours

(1) Labor rate variance = (Standard rate - Actual rate) * Actual hours

= ($21.50- $21.75) * 5,609.20 hours

= -$1,402.30 (Unfavourable)

(2) Labor efficiency variance = Standard rate * (Standard hours - Actual hours)

= $21.50 * (5,400 hours - 5,609.20 hours)
= - $4,497.80 (Unfavourable)

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