The Dine Her Company uses a standard system for cost control purposes. The compa
ID: 2515273 • Letter: T
Question
The Dine Her Company uses a standard system for cost control purposes. The company seeks your assistance in calculating certain production variances for its first month of operations. The company specializes in making a cologne-Essence of Yew and has the following standard cost information for one bottle of this cologne. Standard Costs per Unit Direct Materials (Kumquat juice)10 oz, .50 per oz. Direct Labor $ 5.00 $7.50 During the past month the com tha 41.200 bottles would be produced, however, only 1,100 actually were completed. In completing these bottles the company used 10 workers with each working 160 hours for the month. The total direct labor costs amounted to $8,800 for the month. In addition, the company purchased 20,000 oy. of Kumquat juice at $.55 per oz. and at the end of the month only 8,600 oz. were left e0A?100 x ton 2Material Quantity Variance tethe following: coy dad 1. Material Price Variance 120.00 Labor Rate Variance 4. Labor Efficiency Variance Total Labor Variances (LRV + LEV) Total Materials Variance =?MPV + MQV) | 6. Of what value are the total material and total labor variances?Explanation / Answer
1) Material price variance = (Actual quantity * actual price ) - (actual quantity * standard price)
Actual quantity used = 20000 oz - 8600 oz = 11400 oz
Hence, material price variance = (11400 * 0.55) - (11400*0.5)
= -$570 U
2) Material quantity variance = (Standard quantity allowed - actual qty used) * standard price
Standard qty allowed = actual units produced * standard quantity
= 1100 * 10
= 11000 oz
Hence, material quanity variance = (11000 - 11400) * 0.5
= -$200 U
3) Labour rate variance = (Actual qty * actual rate) - (Actual qty * std rate)
Actual rate = actual cost / actual hours
= 8800 / 1600
= $5.5
3) Labour rate variance = (1600*5.5) - (1600 * 5)
= $800 U
4) Labour efficiency variance = (Actual hours * std rate) - (Std hours * std rate)
= (1600 * 5) - (1650 * 5)
= -250 F
5) Total material variance = MPV+MQV
= -570 - 200
= -$770
6) Total labour variance = LRV + LEV
= 800-250
= $550 U
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