Jackson Industries uses a standard cost system in which direct materials invento

Question

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product: Standard Quantity Standard Price or Rate Standard Cost Direct materials 4 pounds $3.00 per pound $12.00 Direct labor 1.80 hours $10.00 per hour $18.00 During May, Jackson purchased 76,800 pounds of direct material at a total cost of $245,760. The total factory wages for May were $287,400, 90 percent of which were for direct labor. Jackson manufactured 15,000 units of product during May using 57,400 pounds of direct material and 27,500 direct labor-hours. The labor rate variance for May is: $16,340 Favorable $15,140 Unfavorable $16,340 Unfavorable $13,940 Favorable

Explanation / Answer

Labor rate variance

(SR-AR)* AHB

(10 - 90%*287400/27500)*27500

16340 F (Option A)

Direct materials price variance for May

(SP-AP) *AQP

(3 - 245760/76800)* 76800

230400 - 245760 = -15360 U

Direct materials quantity variance for May.

(SQA - AQU)*SP

(15000*4 - 57400)*3=7800 F

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