4 (20 pts) Consider the following data for a manufacturing company: Direct Direc

Question

4 (20 pts) Consider the following data for a manufacturing company: Direct Direct Materials Labor $7.80/1b $12.00/hr 12.75/hr Actual price per unit of input Standard price per unitofinput- Standard input allowed per unit of product Actual units of input Budgeted units of product to be made 57,00/lb- 12.75hr- 10 lb 2 hr 115,000lb 30,000hr 14,400 14,400 Compute the price, quantity, and flexible-budget variances for: a) Direct materials. b) Direct labor. (30 nts) Diamond Company has the following sales budget for the last six months of

Explanation / Answer

1 Direct Material price variance = Actual quantity of material x ( Standard Price - Actual Price)                                                  = 115,000 lbs x ($ 7 - $ 7.80)                                                 = 92,000 unfavourable Direct Material quantity variance = (Standard Quantity - Actual Quantity) x standard price                                                        = (14,400 units x 10 lbs - 115,000 lbs) x $ 7.00 per lb                                                       = 203,000 favourable Direct Material Spending Variance = 203,000 - 92,000 = 111,000 favourable 2 Labor rate variance = Actual hours worked x ( Standard rate - Actual Rate)                                        = 30,000 hours ($ 12.75 - $ 12)                                       = 22,500 Favourable Labor efficiency variance = (Standard hours - Actual hours ) x Standard rate                                                    = (14,400 units x 2 hours - 30,000 hours) x $ 12.75                                                   = 15,300 Unfavourable Labor spending varience = 22,500 - 15,300 = 7,200 Favourable

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