Fremont, inc., builds storage boxes to custom order. Materials include 20 board

ID: 2593321 • Letter: F

Question

Fremont, inc., builds storage boxes to custom order. Materials include 20 board feet of lumber oat $1.25/board foot. Standards call for 2 hours of labor at $15/hr. During March, 4,200 boxes were built. Materials pruchased toataled $103,890 for 86,300 board feet of lumber. Actual lumber usage in production was 82,310 boaard feet. The March payroll was $139,360 for 9,150 hours. Each answer needs to indicate if it is Favorable or Unfavorable.

a) Compute the direct material price variance.

b) Compute the direct material quantity variance.

c) Compute the direct labor rate variance.

d) Compute the direct labor efficiency variance.

Explanation / Answer

Standard Price (SP)

1.25

Standard Quantity (SQ)

20*4200

84000

Actual Price (AP)

103890/86300

1.20

Actual Quantity (AQ)

82310

Direct Material Price Variance

AQ *(SP - AP)

82310 *(1.25 - 1.20)

82310 *(0.05)

4115.5 Favourable

Direct Material Quantity Variance

SP *(SQ - AQ)

1.25 *(84000 - 82310)

1.25*1690

2112.50 Favourable

Standard Rate (SR)

Standard Hours (SH)

2*4200

8400

Actual Rate (AR)

139360/9150

15.23

Actual Hours (AH)

9150

Direct Labor Rate Variance

AH*(SR - AR)

9150 *(15 - 15.23)

9150 *(- 0.23)

2104.5 Unfavourable

Direct Labor Efficiency Variance

SR * (SH - AH)

15 * (8400 - 9150)

15*(-750)

11250 Unfavourable