The following information is available: Actual Inputs for Actual Price Each Unit
ID: 2368374 • 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. 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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