uses a standard cost system and has established the following standards Hernande
ID: 2342455 • Letter: U
Question
uses a standard cost system and has established the following standards Hernandez Corporation for one unit of product: 5. Standard Price Standard Quantity 10 pounds 25 hour Standard Cost $26.00 $28.50 $2.60 per pound Direct materials Direct labor $10.00 per hour2.50 During October, the company purchased 240,000 pounds of material at a total cost of $$88,000. The total using 211,000 pounds of material and 5,200 direct labor hours. Instructions: a. Compute the material quantity and labor efficiency variances. factory wages for October were $49,400. During October, 21,000 units of product were manufactured b. Compute the material price and labor rate variances. Show whether each of the above variances was either favorable or unfavorable.Explanation / Answer
a) Material quantity variance = (Standard quantity-actual quantity)Standard price
= (21000*10-211000)*2.6
Material quantity variance = 2600 Unfavorable
Labour efficiency variance = (Standard hour-actual hour)Standard rate
= (21000*.25-5200)*10
Labour efficiency variance = 500 Favorable
b) Material price variance = (Standard price-actual price)actual quantity
= (2.6*240000-588000)
Material price variance = 36000 Favorable
Labour rate variance = (Standard rate-actual rate)actual hour
= (10*5200-49400)
Labour rate variance = 2600 Favorable
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