The following information is available: Actual Inputs for Actual Price Each Unit
ID: 2368091 • Letter: T
Question
The following information is available: Actual Inputs for Actual Price Each Unit of Output Per Unit of Input Direct materials 11 yards $12 per yard Direct labor 4.2 hours $8 per hour Actual output was 1,000 units. The company's per unit standards call for 15 yards of direct material at $10.00 per yard and 4 hours of direct labor at $9.50 per hour. The company purchased and used 11,000 yards of material. Required: A) Compute the price and quantity variances for direct material. B) Compute the price and quantity variances for direct labor.Explanation / Answer
price variances for direct material = (Actual cost - Standard Costs) * No. of units produced
= (12-10) * 1000 = $2000 (Unfavourable, as actual > standard)
Quantity variance for direct material = (Quantity actually used - Quantity standards set) * Standard price
= (11000-15000)*10 = (40000) (Favourable, as actual used < Standards)
B)
Price variance for direct labour = (Actual costs of labour - Standard cost) * Labour hours standards
= (8 - 9.50) * 4200 = (6300) (Favourable, because actual < standards)
quantity variance for direct labour = (Quantity used - Standards) * Price per labour
= (4200-4000)*9.50 = 1900 (Unfavourable as Used > Standards)
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