Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of produc
ID: 2558288 • Letter: S
Question
Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller Direct Labor: Direct Material: Quantity, 0.19 hour Rate, $9.50 per hour Quantity, 6 kilograms Price, $0.48 per kilogram Actual material purchases amounted to 229,600 kilograms at $0.550 per kilogram. Actual costs incurred in the production of 28,000 units were as follows: Direct labor: Direct material: $59,094 for 5,880 hours $100,870 for 183,400 kilograms Required: 1. Use the variance formulas to compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. (Indicate the effect of each variance by selecting "Favorable" or "unfavorable". Select "None" and enter"0" for no effect (i.e., zero variance).)Explanation / Answer
Answer
Standard data
Qty (kg/hr)
rate per kg/hr
Total cost
Direct material
168000
$0.48
$80640
Direct Labor
5320
$9.5
$50540
Actual Data
Qty (kg/hr)
rate per kg/hr
Total cost
Direct material
183400
$0.55
$100870
Direct Labor
5880
$10.05
$59094
Direct Material Price Variance =
Standard Cost per unit
-
Actual Cost per unit
x
Actual Material used
=
Variance
$0.48
-
$0.55
x
183400 kgs
=
12838
Unfavorable
Direct Material Quantity Variance =
Standard Quantity
-
Actual Quantity used
x
Standard cost per unit
=
Variance
168000 kgs
-
183400 kgs
x
$0.48
=
7392
Unfavorable
Direct Material Purchase Variance =
Standard Cost per unit
-
Actual Purchase Cost per unit
x
Actual Material used
=
Variance
$0.48
-
$0.55
x
183400 kgs
=
12838
Unfavorable
Direct labor Rate Variance =
Standard rate per hr
-
Actual rate per hour
x
Actual Hours
=
Variance
$9.5
-
$10.05
x
5880 hours
=
3234
Unfavorable
Direct labor Efficiency Variance =
Standard Hours
-
Actual Hours
x
Standard rate per hours
=
Variance
5320 hours
-
5880 hours
x
$9.5 per hour
=
5320
Unfavorable
Standard data
Qty (kg/hr)
rate per kg/hr
Total cost
Direct material
168000
$0.48
$80640
Direct Labor
5320
$9.5
$50540
Actual Data
Qty (kg/hr)
rate per kg/hr
Total cost
Direct material
183400
$0.55
$100870
Direct Labor
5880
$10.05
$59094
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