Camping out Co. manufactures down sleeping bags: * Each sleeping bag requires 4

Question

Camping out Co. manufactures down sleeping bags:
* Each sleeping bag requires 4 pounds of down and takes 0.3 hours of direct labor.
* The standard cost of the down used by camping out is $8 per pound and the standard labor cost is $10 per hour.
* In November, Camping out purchased and used 15,000 pounds of down for $120,750.
* During the month, the company manufactured 4,000 sleeping bags.
* Payroll reported a total of 1,480 direct labor hours at a cost of $14,060.

Instructions: Show and label all calculations.

a) Compute the total material variance, the material price variance, and the materials quantity
variance, also indicate whether each variance is favorable or unfavorable.
b) Compute the total labor variance, the labor price variance, and the labor quantity variance, also indicate whether each variance is favorable or unfavorable.

Explanation / Answer

1) Total material variance =4000*4*8-$120,750 =$7250 (F) Materials price variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price) =15,000($120,750/15,000 -$8) =750(U) Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard price) =$8*(15,000-4,000*4) =8000 F 2) Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate) =(1,480-4,000*3)*$10 =2800 U Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate) =1,480 *($14,060/1,480 -10) =740 F total labor variance = 2800 U+740 F = 2060 U

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