Question

During the most recent month, the following activity was recorded: a. Twenty thousand ounces of material were purchased at a cost of $2.40 per ounce. b. All of the material was used to produce 2,500 bottles of Whim. c. Nine hundred hours of direct labor time were recorded at a total labor cost of $10,800. gar11005_ch10_418-471.indd 447 22/11/10 4:48 PM Confi rming Pages 448 Chapter 10 Required: 1. Compute the direct materials price and quantity variances for the month. 2. Compute the direct labor rate and efficiency variances for the month.

Answer 1

Answer:

1. 2,000 F; 5,000 U

2. 1,800 U; 1,000 F

Explanation:

(1) Direct materials price variance:

= Actual Quantity × (Actual Rate - Standard Rate)

= 20,000 × ($2.4 per ounce - $2.5 per ounce)

= 2,000 Favorable

Direct materials quantity variance:

= Standard Rate × (Actual Quantity - Standard Quantity)

= 2.5 × (20,000 ounces - 2,500 bottles × 7.2)

= 5,000 Unfavorable

(2) Direct labor rate variance:

= Actual Hours × (Actual Rate - Standard Rate)

= 900 × [(10,800 ÷ 900) - 10]

= 1,800 Unfavorable

Direct labor efficiency variance:

= Standard Rate × (Actual Hours - Standard Hours)

= 10 × [900 - (0.4 × 2,500)]

= 1,000 Favorable

Note:

Table is missing from the question so I have attached the table with the answer.