Exercise 23-7 Levine Inc., which produces a single product, has prepared the fol
ID: 2586337 • Letter: E
Question
Exercise 23-7 Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $1.80 per pound) Direct labor (6 hours at $14.00 per hour) During the month of April, the company manufactures 230 units and incurs the following actual costs. Direct materials purchased and used (1,500 pounds) Direct labor (1,410 hours) Compute the total, price, and quantity variances for materials and labor. $14.40 $84.00 $2,850 $19,458 Total materials variance Materials price variance Materials quantity variances Total labor variance Labor price variance Labor quantity varianceExplanation / Answer
Total materials variance = (Actual quantity * Actual price) - (Standard quantity * Standard price)
= 2,850 - (230 * 14.4)
= 462 Favourable.
Materials price variance = (Standard price - Actual price) * Actual quantity
= [1.8 - (2,850/1,500)] * 1,500
= 150 Unfavourable.
Materials quantity variance = (Standard quantity - Actual quantity) * Standard price
= [(230 * 8) - 1,500] * 1.8
= 612 Favourable.
Total labour variance = (Actual hours * Actual rate) - (Standard hours * Standard rate)
= 19,458 - (230 * 84)
= 138 Unfavourable.
Labour price variance = (Standard rate - Actual rate) * Actual hours
= [14 - (19,458/1,410)] * 1,410
= 282 Favourable.
Labour quantity variance = (Standard hours - Actual hours) * Standard rate
= [(230 * 6) - 1,410] * 14
= 420 Unfavourable.
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