Exercise 23-7 Levine Inc., which produces a single product, has prepared the fol
ID: 2521734 • Letter: E
Question
Exercise 23-7 Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $3.90 per pound) Direct labor (5 hours at $14.00 per hour) During the month of April, the company manufactures 270 units and incurs the following actual costs. Direct materials purchased and used (2,100 pounds) Direct labor (1,390 hours) Compute the total, price, and quantity variances for materials and labor. $31.20 $70.00 $8,400 $19,182 Total materials variance Materials price variance Materials quantity variance Total labor variance Labor price variance Labor quantity varianceExplanation / Answer
Total material variance = Actual cost - Budgeted cost
= 8400 - (31.20*270) = 8400 - 8424 = 24 (Favourable)
Material Price variance = Change in price* Actual quantity
Actual price per pound = 8400/2100 = 4
Budgeted price per pound = 3.90
Materials price variance = (4 - 3.90)*2100 = 210 (unfavourable)
Materials quantity variance = Change in quantity* Budgeted rate
= (8*270 - 2100)*3.90 = (2160 - 2100)*3.9 = 234 (Favourable)
Total labour variance = Actual cost - Budgeted cost
= 19182 - (70*270) = 19182 - 18900 = 282 (unfavourable)
Labor price variance = Change in rate * Actual hours
Actual rate per hour = 19182/1390 = 13.8
Budgeted rate per hour = 14
Labor price variance = (13.8 - 14)*1390 = 278 (Favourable)
Labor quantity variance = Change in labor hours*Budgeted rate per hour
= (1390 - 5*270)* 14 = (1390 - 1350)*14 = 560 (unfavourable)
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