IV. Standard Costing A company produces and sells footballs. The standard cost f
ID: 2567939 • Letter: I
Question
IV. Standard Costing A company produces and sells footballs. The standard cost for materials and labor for one regulation-size football is as follows: Direct materials Direct labor 2 feet of leather at $10 per foot 3/4 hour at S12 per hour Information on 2004 production activities is as follows Expected production Actual production Leather purchases Leather used in production Direct labor used in production 100,000 footballs 90,000 footballs 190,000 feet at a total cost of $2,014,000 179,000 feet 70,000 hours at a total cost of $827,400 a. What is the materials quantity variance for this product? Ans: $favorable unfavorable (circle one) b. What is the materials price variance for this product? Ans: $favorable unfavorable (circle one) c. What is the labor efficiency variance for this product? favorable unfavorable circle one) Ans:$ d. What is the labor rate variance for this product? favorable unfavorable (circle one) Ans: $Explanation / Answer
a. Materials quantity variance = Standard price * (Standard quantity for actual production - Actual quantity)
= 10 * [(2 * 90,000) - 179,000]
= 10,000 favourable
b. Materials price variance = Actual quantity purchased * (Standard price - Actual price)
= 190,000 [10 - (2,014,000/190,000)]
= 114,000 unfavourable
c. Labour efficiency variance = Standard rate * (Standard hours for actual production - Actual hours)
= 12 * [(90,000*0.75) - 70,000]
= 30,000 unfavouralble
d. Labour rate variance = Actual hours * (Standard rate - Actual rate)
= 70,000 * [12 - (827,400/70,000)]
= 12,600 favourable.
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