In July, 2010, Zinger Corp, purchased 20,000 gallons of Numerol for $ 61,000 to

Question

In July, 2010, Zinger Corp, purchased 20,000 gallons of Numerol for $ 61,000 to use in the production of product #43MR7. During July, Zinger Corp. manufactured 3,900 units of product #43MR7. The following information is available about standard and actual quantities and costs:

                          Standard for on One unit                Actual usage for July
Direct material       4.8 gallons @$ 3 per gallon           18,350 gallons
Direct labor            20 minutes @$ 9 per DLH             1,290 DLHs @$ 9.02 per DLH

a. compute the material purchase price variance and the material quantity variance.

b. compute the labor rate, labor efficiency, and total labor variance.

Explanation / Answer

Direct materials price variance (MPV) formula: [Materials Price Variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price)] ie MPV= ($61000) - (20000*$3) = $1000 = $1000U.....Ans(a1) Materials quantity variance (MQV) Formula: [Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard Price)] ie MQV = (18350*$3) - ((3900*4.8)*$3) = -$1110 = $1110F .....Ans (a2) Formula of labor efficiency variance (LEV) : [Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate)] ie LEV = (1290*$9) - (3900*20/60*$9) = -$90 = 90F ....Ans (b1) Direct Labor Rate Variance (DLRV) Formula: [Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate)] ie DLRV = (1290*$9.02) - (1290*$9) = $25.80 = 25.80U .....Ans (b2) Total labor variance (TLV)= LEV+DLRV = -$90 +$25.80 = -$64.20 = 64.20F ...Ans (b3)

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