Wheeler corporation produces and sell special eyeglass straps for sporting enthu
ID: 2379334 • Letter: W
Question
Wheeler corporation produces and sell special eyeglass straps for sporting enthusiasts. In 2011, the company budgeted for production and sales of 1200 straps. However, the company produced and sold just 1100 straps. Each strap has a standard requiring one metre of material at budgeted cost of 1.50 per metre and two hours of assembly time at a cost of 12 dollar per hour. Actual costs for the production of 1100 items were 1435.50 for materials (990 metres at 1.45 dollar per meter) and 29 161 dollar for labour (2420 hours at 12.05 dollar per hour).
Required:
a. Calculate the direct material price variance
b. Calculate the direct material usage variance
c. Calculate the direct labour rate variance
d. Calculate the direct labour efficiency variance
Explanation / Answer
Wheeler corporation produces and sell special eyeglass straps for sporting enthusiasts. In 2011, the company budgeted for production and sales of 1200 straps. However, the company produced and sold just 1100 straps. Each strap has a standard requiring one metre of material at budgeted cost of 1.50 per metre and two hours of assembly time at a cost of 12 dollar per hour. Actual costs for the production of 1100 items were 1435.50 for materials (990 metres at 1.45 dollar per meter) and 29 161 dollar for labour (2420 hours at 12.05 dollar per hour).
Required:
a. Calculate the direct material price variance
Direct material price variance= (Standard Price-Actual Price)*Actual Qty
= (1.50-1.45)*990
= $49.50 Favorable
b. Calculate the direct material usage variance
Direct material usage variance= (Standard Qty -Actual Qty )*Standard Price
= (1100-990)*1.50
= $165 favorable
c. Calculate the direct labour rate variance
Direct labour rate variance= (Standard Rate-Actual Rate)*Actual Hour
= (12-12.05)*2420
= $121 Unfavorable
d. Calculate the direct labour efficiency variance
Direct labour efficiency variance= (Standard Hour -Actual Hour )*Standard Rate
= (2200-2420)*12
= $2640 Unfavorable
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