Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Exercise 25-7 Levine Inc., which produces a single product, has prepared the fol

ID: 2557952 • Letter: E

Question

Exercise 25-7 Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (9 pounds at $3.70 per pound) Direct labor (5 hours at $11.00 per hour) During the month of April, the company manufactures 340 units and incurs the following actual costs. Direct materials purchased and used (1,500 pounds) Direct labor (1,730 hours) Compute the total, price, and quantity variances for materials and labor. Total materials variance Materials price variance Materials quantity variance Total labor variance Labor price variance Labor quantity variance $33.30 $5,850 $18,684

Explanation / Answer

Solution:

Standard quantity of material for actual production = 340*9 = 3060 pound

Standard price of material = $3.70

Actual quanity of material = 1500 pound

Actual price of material = $5,850 / 1500 = $3.90

Material price variance = (SP - AP) * AQ = ($3.70 - $3.90) * 1500 = $300 U

Material quantity variance = (SQ - AQ) * SP = (3060 - 1500) * $3.70 = $5,772 F

Total material variance = Material price variance + Material quantity variance

= -$300 + $5,772 = $5,472 F

Standard hours of labor for actual production = 340 * 5 = 1700 hours

Standard rate of direct labor = $11 per hour

Actual hours of labor = 1730 hours

Actual rate of direct labor = $18,684/ 1730 = $10.80 per hour

Labor price variance = (SR - AR) * AH = ($11 - $10.80) * 1730 = $346 F

Labor quantity variance = (SH - AH) * SR = (1700 - 1730) * $11 = $330 U

Total labor variance = Labor price variance + Labor quantity variance = $346 - $330 = $16 F