Wheeler Corporation produces and sells special eyeglass straps for sporting enth

Question

Wheeler Corporation produces and sells special eyeglass straps for sporting enthusiasts. In 2009, the company budgeted for production and sales of 1,200 straps. However, the company produced and sold just 1,100 straps. Each strap has a standard requiring 1 foot of material at a budgeted cost of $1.50 per foot and 2 hours of assembly time at a cost of $12 per hour. Actual costs for the production of 1,100 items were $1,435.50 for materials (990 feet at $1.45 per foot) and $29,161 for labor (2,420 hours at $12.05 per hour).

Required

If required, round answers to the nearest cent. Enter all amounts as positive numbers.

A. Calculate the direct material price variance.


B. Calculate the direct material usage variance.

Explanation / Answer

Standard quantity = 1 foot/unit * 1100 units = 1100 feet
Standard price = $1.50 per foot
Actual quantity = 990 feet
Actual price = $1.45 per foot
A. Calculate the direct material price variance.
Materials price variance = AQ(AP-SP) = 990(1.45-1.50) = -49.50 which is 49.50 favorable
B. Calculate the direct material usage variance.
Materials usage variance = SP(AQ-SQ) = 1.50*(990-1100) = -165, which is 165 favorable

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