Timber Enterprises purchased 70,300 pounds (cost $428,830) of direct material to

Question

Timber Enterprises purchased 70,300 pounds (cost $428,830) of direct material to be used in the manufacture of the company's only product. According to the production specifications, each completed unit requires six pounds of direct material at a standard cost of $6 per pound. Direct materials consumed by the end of the period totaled 68,600 pounds in the manufacture of 17,400 finished units. An examination of Timber's payroll records revealed that the company worked 48,000 labor hours (cost- $633,600) during the period, and specifications called for each completed unit requiring 2.7 hours of labor at a standard cost of $13.6 per hour. Assume that the company computes variances at the earliest point in time Required: Compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) Direct-material price variance Direct-material quantity variance Direct-labor rate variance Direct-labor efficiency variance

Explanation / Answer

Direct material price variance = (6*70300-428830) = 7030 U

Direct material quantity variance = (17400*6-68600)*6 = 214800 F

Direct labour rate variance = (13.6*48000-633600) = 19200 F

Direct labour efficiency variance = (17400*2.7-48000)*13.6 = 13872 U

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