5, Sunny Juice Company produces fruit juices, sold in gallons. Recently, the com

Question

5, Sunny Juice Company produces fruit juices, sold in gallons. Recently, the company lon oh Direct materials (128 oz. @ $0.046) $5.888. S adopted the following standards for one gallon of its cranbery juice: $12.00) 0.456 Direct labor (0.038 hr. Standard prime cost $6.344 During the first week of operation, the company experienced the followingfactual results: AG a. Gallon units produced: 52,000 A b. Ounces of materials purchased: 6.420.000 unces at 50.047 c. No beginning or ending inventories of raw materials d. Direct labor: 2,000 hours at $12.50 Required 1. Compute price and usage variances for dirct materials., 2. Compute the rate variance and the-efficiency variance for direct labor.

Explanation / Answer

(1).

Direct material price variance;

Formula is as follow;

(Actual price – Standard price) * Actual quanity used

Standard price = $.046

Actual price = $.047

Actual quatity used = 6420000 Ounces

Now let’s put the values in the formula;

($.047 – $.046) * 6420000 = $6420 (Unfavourable)

Direct material usage variance;

Formula is as follow;

(Actual quanity – Standard quantity) * Standard price

Standard quantity (52000 * 128) = 6656000

Actual quantity = 6420000

Standard price = $.046

Now let’s put the values in the formula;

(6420000 – 6656000) * $.046 = $10856 (Favourable)

(2).

Direct labor rate variance;

Formula is as follow;

(Actual rate – Standard rate) * Actual hours

Standard rate = $12

Actual rate = $12.50

Actual hours used = 2000 Hours

Now let’s put the values in the formula;

($12.50 – $12) * 2000 = $1000 (Unfavourable)

Direct labor efficiency variance;

Formula is as follow;

(Actual hours – Standard hours) * Standard rate

Standard hours (52000 * .038) = 1976 hours

Actual hours = 2000 hours

Standard price = $12

Now let’s put the values in the formula;

(2000 – 1976) * $12 = $288 (Unfavourable)

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