Adventure Company manufactures camping tents from a lightweight synthetic fabric

Question

Adventure Company manufactures camping tents from a lightweight synthetic fabric. Each tent has a standard materials cost of $42, consisting of 4 yards of fabric at $10.50 per yard. The standards call for 2 hours of assembly at $20 per hour. The following data were recorded for October, the first month of operations:

(a) Compute all standard cost variances for materials and labor.

Fabric purchased 9,000 yards x $ 10.00 per yard Fabric used in production of 1,700 tents 7,000 yards Direct labor used 3,600 hours x $21.50 per hour

Explanation / Answer

Standard cost variances for materials and labor. Materials price variance (usage basis) = (Actual price-Standard price)*quantity used = (10.00-10.50)*7000 = 3500 Favorable Materials price variance (purchase basis) = (Actual price-Standard price)*Quantity purchased = (10.00-10.50)*9000 = 4500 Favorable Materials quantity variance = (Actual quantity used-Standard quantity for actual production)*Standard price = (7000-1700*4)*10.50 = 2100 Favorable Labor rate variance = (Actual labor rate-Standard labor rate)*Actual labor hours = (21.50-20.00)*3600 = 5400 Unfavorable Labor efficiency variance = (Actual labor hours-Standard labor hours for actual production)*Standard labor hour rate = (3600-1700*2)*20 = 4000 Unfavorable

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