E9-13 Determining Actual Costs, Standard Costs, and Variances [LO 9-3, 9-4] Ambe

Question

E9-13 Determining Actual Costs, Standard Costs, and Variances [LO 9-3, 9-4]

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows:

Required:
1. Calculate the total cost of purchases for October.

2. Compute the direct materials price variance based on quantity purchased. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

3. Calculate the direct materials quantity variance based on quantity used. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

4. Compute the standard direct labor rate for October. (Round your answer to 2 decimal places.)

5. Compute the direct labor efficiency variance for October. (Round your intermediate calculation to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Actual purchase price $ 3.10 per lb. Actual direct labor rate $ 8.30 per hour Standard purchase price $ 2.90 per lb. Standard quantity for sets produced 1,050,000 lbs. Standard direct labor hours allowed 21,000 Actual quantity purchased in October 1,325,000 lbs. Actual direct labor hours 18,000 Actual quantity used in October 1,080,000 lbs. Direct labor rate variance $6,300 F

Explanation / Answer

1) Total purchase = 3.1*1325000 = 4107500

2) Material price variance = (2.9-3.1)*1325000 = 265000 U

3) Material quantity variance = (1050000-1080000)*2.9 = 87000 U

4) Labour rate variance = (Standard rate-actual rate)Actual hour

6300 = (X*18000-149400)

-18000X = 155700

X(standard rate) = 8.65

5) Direct labour efficiency variance = (21000-18000)*8.65 = 25950 F

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