Grand River Manufacturing produces a metal flange that it sells to several local
ID: 2562700 • Letter: G
Question
Grand River Manufacturing produces a metal flange that it sells to several local home building supply retailers. The company has set standards as follows for materials and labour Direct MaterialsDirect Labour Standard quantity or hours per u Standard price or rate Standard cost per unit 0.5 kilograms ? hours S2 per kilogram ? per hour $1.00 During the past month, the company purchased 1,570 kilograms of direct materials at a cost of $2,512. All of this material was used in the production of 1,820 units of product using 460 hours of direct labour. Direct labour cost totalled $5,980 for the month. The following variances have been computed Labour rate variance Total labour variance Materials quantity variance $ 460 U S 440 F $1,320 U Required. 1. Compute the following for direct labour. (Round "hours per unit" answer to 2 decimal places.) a. Standard rate per hour for labour b. Standard quantity allowed for labour for the month's production C. Standard quantity of labour allowed per unit of product. hrs hrs per unit 2. Compute the following for direct materials. (Round your answers to 2 decimal places.) a. Actual direct materials cost per kilogram for the month b. Materials price varianceExplanation / Answer
1.
a.
Labor rate variance = (SR - AR) x AH
-460 = [SR - (5980/460)] x 460
-460 = [SR - 13] x 460
SR = $12
Standard rate per hour of labor
b.
Labor efficiency variance = Total labor variance - Labor rate variance
Labor efficiency variance = $440 F - $460 U
Labor efficiency variance = $900 F
Labor efficiency variance = (SH - AH) x SR
900 = (SH - 460) x $12
SH = 535 hours
Standard quantity allowed for labor for the month's production = 535 hours
c.
Standard quantity of labor allowed per unit opf product = 535/1820 = 0.29 hours
2.
a. Actual direct materials cost per kilogram for the month = $2512/ 1570 = $1.60
b.
Material price variance = (SP - AP) x AQ purchased
Material price variance = ($2 - $1.60) x 1570
Material price variance = $628 F
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