Use the following information to answer the next three questions Bill\'s Furnitu

Question

Use the following information to answer the next three questions Bill's Furniture Corporation produces furniture, it expects that the cost of direct materials per unit will amount to $31.50. Bill's Furniture Corporation expected to produce 2,200 pieces of furniture last month; however, actual production totaled 2,450 pieces of furniture. The actual cost of direct materials per unit amounted to $42.00 1. What is the master (static) budget variance for direct materials? Indicate whether the variance is favorable or unfavorable.

Explanation / Answer

1) Direct Materials Budget Variance = Budgeted Materials Cost - Actual Materials Cost

= (Budgeted Units*Budgeted price) - (Actual Units*Actual Price)

= (2,200*$31.50) - (2,450*$42.00)

= $69,300 - $102,900 = ($33,600) Unfavorable

2) Direct Materials Spending Variance = (Std Price - Actual Price)*Actual Qty

= ($31.50 - $42.00)*2,450 = ($25,725) Unfavorable

3) Direct Materials Volume Variance = (Std Qty - Actual Qty)*Std Price

= (2,200 - 2,450)*$31.50 = (7,875) Unfavorable

4) Actual units produced = 8,000 units

Standard materials for actual production = 8,000 units*5 pounds = 40,000 pounds

Actual Price per pound = $105,000/35,000 pounds = $3 per pound

Direct Materials Price Variance = (Std Price - Actual Price)*Actual Qty

= ($3.50 - $3.00)*35,000 pounds = $17,500 Favorable

5) Direct Materials Quantity Variance = (Std Qty - Actual Qty)*Std Price

= (40,000 - 35,000)*$3.50 = $17,500 Favorable

6) Standard labor hours for Actual production = 8,000 units*1.50 hrs = 12,000 hrs

Actual Labor Rate = $177,000/15,000 = $11.80

Direct Labor Rate Variance = (Std Rate - Actual Rate)*Actual hrs

= ($12.00 - $11.80)*15,000 hrs = $3,000 Favorable

7) Direct Labor Efficiency Variance = (Std hrs - Actual hrs)*Std Rate

= (12,000 hrs - 15,000 hrs)*$12.00 = ($36,000) Unfavorable

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