The following data was obtained for a company that makes statues: Standard Input
ID: 2586878 • Letter: T
Question
The following data was obtained for a company that makes statues:
Standard Inputs Expected
For Each Unit of Output
Standard Price
Per Unit of Input
Direct material
5 pounds
$12 per pound
Direct labor
1.5 hours
$12 per hour
During the month of November, the company actually produced 1,000 statutes, which is 100 units less than expected. Direct material purchased and used amounted to 5,500 pounds at a cost of
$12.50 per pound. Actual direct labor was 1,450 hours at an actual cost of $13.00 per hour.
Required:
Compute the price and quantity variances for direct materials.
Compute the price and quantity variances for direct labor.
Explain in words critical reasoning used to arrive at the answers in Part A and Part B.
Standard Inputs Expected
For Each Unit of Output
Standard Price
Per Unit of Input
Direct material
5 pounds
$12 per pound
Direct labor
1.5 hours
$12 per hour
Explanation / Answer
a)Material price variance =AQ[AR-SR]
= 5500[12.50-12]
= 5500*.50
= 2750 U
Material quantity variance =SR[AQ-SQ]
= 12[5500-(1000*5)]
= 12[5500-5000]
= 12* 500
= 6000U
B)Labor price variance = AH[AR-SR]
= 1450 [13-12]
= 1450 U
LAbor quantity variance =SR[AH-SH]
= 12[1450-(1000*1.5)]
= 12[1450-1500]
= 12*-50
= -600 F
C)Material price and quantity variance both are unfavorable which means the actual cost per pound is more than the budgeted cost per pound resulting in unfavorable variance of 2750 .Also Material quantity variance is unfavorable which means actual quantity used is more than the standard quantity that should be used for actual output .
Labor price variance is unfavorable means the actual labor cost per hour is more than standard cost per hour .Labor quantity variance is favorable as the actual hours used is less than standard hours to be used for actual output.
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