QUESTION 3 1. The standard cost of Product 245 manufactured by Albert Industries
ID: 2334446 • Letter: Q
Question
QUESTION 3 1. The standard cost of Product 245 manufactured by Albert Industries includes 2 pounds of direct materials at RM4.00 per pound. During September, 40,000 pounds of direct materials are purchased at a cost of RM3.85 per pound, and all of the direct materials are used to produce 19,000 units of Product 245. Instruction Compute the materials price and quantity variances (5 marks) Aztec, Inc.'s standard labor cost of producing one unit of product is 2 hours at the rate of RM14.00 per hour. During February, 52,000 hours of labor are incurred at a cost of RM13.80 per hour to produce 25,000 units of product. 2. Instruction Compute the labor price and labor quantity variances (5 marks)Explanation / Answer
Material Price Variance = (Actual Price – Std. Price) x Actual Qty
= (RM 3.85-RM 4.00) x 40,000
= - RM 0.2 x 40,000 = - RM 800 Favorable
Standard Qty = Standard Qty per unit x no of units produced
= 19,000 x 2
= 38,000 pounds
Material Qty Variance = (Actual Qty- Standard Qty) X Standard Price
= (40,000-38,000) x RM 4.00
= 2,000 x RM 4.00
= RM 8,000 Unfavorable
Labor Price Variance = (Actual Rate – Std. Rate) x Actual Hrs
= (RM 13.80-RM 14.00) x 52,000 hrs
= - RM 0.2 x 52,000 hrs
= - RM 10,400 Favorable
Standard Hrs= Standard hrs required per unit x no of units produced
= 2 x 25,000 units
= 50,000 hrs
Labor quantity Variance = (Actual Hrs - Standard Hrs) X Standard Rate
= (52,000-50,000) x RM 14.00
= 2,000 x RM 14.00
= RM 28,000 Unfavorable
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