eBook Calculator Materials and Labor Variances At the beginning of the year, Cra
ID: 2594722 • Letter: E
Question
eBook Calculator Materials and Labor Variances At the beginning of the year, Craig Company had the following standard cost sheet for one of its plastic products Direct materials (5 lbs. $4.00) Direct labor (2 hrs. @ $.15.00) Standard prime cost per unit The actual results for the year are as follows: $20.00 30.00 $50.00 a. Units produced: 360,000. b. Materials purchased: 2,520,000 pounds c. Materials used: 2,232,000 pounds. d. Direct labor: 792,000 hours $11.64. $4.50. Required: 1. Compute price and usage variances for materials. Enter amounts as positive numbers and select Favorable or Unfavorable. Material price variance Material usage variance nfavorable V Unfavorable v 2. Compute the labor rate and labor efficiency vanances. Enter amounts as positive numbers and select Favorable or Unfavorable. Labor rate variance Labor efficiency variances Favorable V unfavorable Previous Next Check My Work nt for GradingExplanation / Answer
Material Price Variance (MPV) is the variance in price of the material i.e. what was the standard price and what actual has been paid.
MPV = (standard price - Actual price )x Actual quantity
=(4.00-4.50)x2,232,000
= 1,116,000 Unfavorable (Actual price is more than standard hence it is unfavorable variance)
Material Usage Variance - It is the variance of the quantity of the material used in production. If the material used is higher than the standard then it will be unfavorable variance and vice versa.
Material Usage Variance = (Actual qty - Standard Qty) x Standard price
= (2,232,000-1,800,000)x4
= 1,728,000 Unfavorable
Standard qty = 360,000 units x material used per unit i.e. 4 = 360,000x4 = 1,800,000
Labour Rate Variance(LRV) : (Standard Rate-Actual Rate) x Actual hrs
= (15-11.64) x 792,000
= 2,661,120 Favorable
Labour efficiency Variance : Standard rate x (Std hrs - actual hrs)
= 15 x (720,000-792,000)
= 1,080,000 unfavorable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.