Tents manufactures small one-man tents for camping use. The company uses a stand

Question

Tents manufactures small one-man tents for camping use. The company uses a standard cost system. Normal capacity is 15,000 direct labor hours. Overhead is applied on the basis of direct labor hours. 12,000 tents were completed during the year. Other cost data is as follows:

Cost Data                Actual                                                          Standard (per tent)

Direct Materials          $424,800 for 59,000 yards of canvas             5 yards @ $7.00 per yard

                                    ($7.20 per yard)

Direct Labor                $127,680 for 11,400 hours                              1 hour @ $12.00 per hour

                                    ($11.20 per hour)

(A.) Compute the Materials Price and Quantity Variances:

(B.) Compute the Labor Rate and Efficiency Variances:

Explanation / Answer

MPV=59000(7-7.2)=-58999.8

MQV=7(60000-59000)=7000

Labor rate= 11400(12-11.2)=9120

labor efficiency= 12(12000-11400)=7200

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