4) Thousand Springs Company produces perfume called Syringa. The Direct material

Question

4) Thousand Springs Company produces perfume called Syringa. The Direct materials and direct labor standards for one bottle of Syringa are given below: Standard QuantityStandard Price or Standard Cost Direct Materials Direct Labor or Hours 7.2 oz 0.3 hours Rate $2.50 per oz $18.00 per bottle $10.00 per hour $3.00 per b During the most recent month the following was recorded .20,000 oz of material were purchased at a cost of $2.40 per oz 18,000 oz of the material was used to produce 2,400 bottles of Syringa. .900 hours of direct labor time was recorded at a total labor cost of $10,000 Calculate (remember to show all work) A) The direct materials price, quantity and total (also called spending) variances for the month. B) The direct labor rate, efficiency and total (also called spending) variances for the month.

Explanation / Answer

(A).

Direct material price variance;

Formula of direct material price variance is as follow;

Direct material price variance = (Standard price – Actual price) * Actual quantity used

Standard price = $2.50

Actual price = $2.40

Actual quantity used = 18000

Now let’s put values in above given formula;

Direct material price variance = ($2.50 – $2.40) * 18000 = $1800 (F)

Direct material quantity variance;

Formula of direct material quantity variance is as follow;

Direct material quantity variance = (Standard quantity – Actual quantity) * Standard price

Standard quantity (7.2 * 2400) = 17280

Actual quantity used = 18000

Standard price = $2.50

Now let’s put values in above given formula;

Direct material quantity variance = (17280 – 18000) * $2.50 = $1800 (U)

Total direct material (Spending) variance;

Formula of Total direct material (Spending) variance is as follow;

Total direct material (Spending) variance = (Standard quantity * Standard price) – (Actual quantity * Actual price)

Standard quantity (7.2 * 2400) = 17280

Actual quantity used = 18000

Standard price = $2.50

Actual price = $2.40

Now let’s put values in above given formula;

Total direct material (Spending) variance = (17280 * $2.50) – (18000 * $2.40) = Nil

(2).

Direct labor rate variance;

Formula of direct labor rate variance is as follow;

Direct labor rate variance = (Standard rate – Actual rate) * Actual labor hours used

Standard rate = $10

Actual rate = $11.11

Actual labor hours used = 900 hours

Now let’s put values in above given formula;

Direct labor rate variance = ($10 – $11.11) * 900 = $1000 (U)

Direct labor efficiency variance;

Formula of direct labor efficiency variance is as follow;

Direct labor efficiency variance = (Standard hours – Actual hours) * Standard rate

Standard hours (0.3 * 2400) = 720

Actual hours = 900

Standard rate = $10

Now let’s put values in above given formula;

Direct labor efficiency variance = (720 – 900) * $10 = $1800 (U)

Total direct labor (Spending) variance;

Formula of Total direct labor (Spending) variance is as follow;

Total direct direct (Spending) variance = (Standard hours * Standard rate) – (Actual hours * Actual rate)

Standard hours (0.3 * 2400) = 720

Actual hours = 900

Standard rate = $10

Actual rate = $11.11

Now let’s put values in above given formula;

Total direct labor (Spending) variance = (720 * $10) – (900 * $11.11) = $2800 (U)

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