Cave Creek Industrial Works has the following standards for one of its products.

ID: 2374389 • Letter: C

Question

Direct Material (3ft @ $4) $12.00

Direct Labor (.4hr @ $12) $ 4.80

During the most recent year, the following actual results were recorded.

Production 6,000 Units

Direct Material (11,750ft @ $5.20) $61,100

Direct Labor (2,900Hr @ $10.20) $29,580

1. Calculate the Materials Price Variance

2. Calculate the Materials Usage Variance

3. Calculate the Labor Rate Variance

Hi,

Please find the answers as follows:

Part A:

Materials Price Variance = Actual Quantity of Material*(Actual Rate - Standard Rate) = 11750*(5.2 - 4) = 14100 (U)

Part B:

Materials Usage Variance = Standard Rate*(Actual Quantity - Standard Quantity) = 4*(11750 - 3*6000) = 25000 (F)

Part C:

Labor Rate Variance = Actual Hours*(Actual Rate - Standard Rate) = 2900*(10.2 - 12) = 5220 (F)

Part D:

Labor Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours) = 12*(2900 - .4*6000) = 6000 (U)

Thanks.

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