Question

Direct manufacturing labor and direct materials variances, missing data. (CMA, heavily adapted) Oyster Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $248 per board. This includes 35 pounds of direct materials, at the budgeted price of $3 per pound, and 11 hours of direct manufacturing labor, at the budgeted rate of $13 per hour. Following are additional data for the month of July:
Units completed 5,600 units,
Direct material purchases 230,000 pounds,
Cost of direct material purchases $759,000,
Actual direct manufacturing labor-hours 43,000 hours,
Actual direct manufacturing labor cost $623,500,
Direct materials efficiency variance $ 1,200 F,
There were no beginning inventories.
1. Compute direct manufacturing labor variances for July,
2. Compute the actual pounds of direct materials used in production in July,
3. Calculate the actual price per pound of direct materials purchased,
4. Calculate the direct materials price variance.

Answer 1

Answer:

Instructions are below.

Explanation:

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Standard quantity= 5,600*11= 61,600

Direct labor time (efficiency) variance= (61,600 - 43,000)*13

Direct labor time (efficiency) variance= $241,800 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 623,500/43,000= $14.5

Direct labor rate variance= (13 - 14.5)*43,000

Direct labor rate variance= $64,500 unfavorable

Total variance= 241,800 - 64,500= $177,300 favorable

Now, we need to calculate the actual pounds used in production:

Direct material quantity variance= (standard quantity - actual quantity)*standard price

1,200= (5,600*35 - actual quantity)*3

400= 196,000 - actual quantity

actual quantity= 195,600

Actual price= 759,000/230,000= $3.3 per pound

Finally, the direct material price variance:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (3 - 3.3)*759,000

Direct material price variance= $227,700 unfavorable