Hickman Company has developed the following standard costs for its product for 2

Question

Hickman Company has developed the following standard costs for its product for 2018:

Standard Cost Card

Product A

Cost Element                                Standard Quantity         ×         Standard Price               =              Standard Cost
Direct materials                         4 pounds                                                      $3                                                       $12
Direct labor                                   3 hours                                                            8                                                       24

Actual results for 2018 are as follows:

26,000 units of Product A were produced.

Actual direct labor costs were $630,800 for 76,000 direct labor hours worked.

Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds.

Instructions
Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable.

(a)        Materials quantity variance.

(b)            Total direct labor variance.

(c)             Direct labor quantity variance.

(d)            Direct materials price variance.

Explanation / Answer

a Materials quantity variance = 3*(105000-26000*4)= $3000 unfavorable b Total direct labor variance = 630800-(26000*24)= $6800 unfavorable c Direct labor quantity variance = 8*(76000-26000*3)= $16000 favorable d Direct materials price variance = 283500-(105000*3)= $31500 favorable

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