Tepid Inc., created standard costs for direct material and direct labor. In 2018

Question

Tepid Inc., created standard costs for direct material and direct labor. In 2018, Tepid calculated standard costs for one of their major products (listed below), the 20 gallon plastic container.
Budgeted quantity     Budgeted price
Direct materials           0.35 pounds                $32 per pound
Direct labor                 0.19 hours                   $19 per hour

During June, Tepid produced and sold 4,000 containers using 1,500 pounds of direct materials at an average cost per pound of $30 and 635 direct manufacturing labor hours at an average wage of $16.25 per hour. (Don’t forget to designate if the variance is favorable or unfavorable. Round your numbers so that no decimal places are used)

a) June's direct material flexible-budget variance is:
b) June's direct material price variance is:
c) June's direct material efficiency variance is:
d) June's direct manufacturing labor flexible-budget variance is:
e) June's direct manufacturing labor price variance is:
f) June's direct manufacturing labor efficiency variance is:

Explanation / Answer

a Direct material flexible-budget variance = (1500*30)-(4000*0.35*32)= 200 Unfavorable b Direct material price variance = 1500*(30-32)= 3000 Favorable c Direct material efficiency variance = 32*(1500-4000*0.35)= 3200 Unfavorable d Direct manufacturing labor flexible-budget variance =(635*16.25)-(4000*0.19*19)= 4121 Favorable e Direct manufacturing labor price variance = 635*(16.25-19)= 1746 Favorable f Direct manufacturing labor efficiency variance =19*(635-4000*0.19)= 2375 Favorable

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