During March, Manhattan Fabrics Corporation manufactured 650 units of a special

Question

During March, Manhattan Fabrics Corporation manufactured 650 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to March.

During March, Manhattan Fabrics Corporation manufactured 650 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to March.

Compute the following variances for the month of March. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).

During March, Manhattan Fabrics Corporation manufactured 650 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to March.

During March, Manhattan Fabrics Corporation manufactured 650 units of a special multilayer fabric with the trade name Stylex. The following information from the Stylex production department also pertains to March.

  Direct material purchased: 19,500 yards at $1.53 per yard $ 29,835   Direct material used: 11,000 yards at $1.53 per yard 16,830   Direct labor: 3,600 hours at $9.30 per hour 33,480

The standard prime costs for one unit of Stylex are as follows:   Direct material: 20 yards at $1.50 per yard $ 30.00   Direct labor: 4 hours at $9.00 per hour 36.00   Total standard prime cost per unit of output $ 66.00 Required:

Compute the following variances for the month of March. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).

Explanation / Answer

Direct Material Price Variance = (SR – AR) * AQ used

    (1.50 – 1.53) * 11000 = 330 (U)

Direct Material Quantity Variance = (SQ – AQ) * SR

SQ = Actual output * SQ per unit

     = 650 * 20 = 13000 yds

(13000 – 11000) * 1.50 = 3000 (F)

Total Direct Material Cost Variance = Direct Material Price Variance + Direct Material Quantity Variance

    = 330(U) + 3000(F) = 2670(F)

Direct Labour Rate Variance = (SR – AR) * Actual Hrs

= (9 – 9.30) * 3600 = 1080 (U)

Direct Labour Efficiency Variance = (S hrs – A hrs) * SR

S hrs = Actual Output * std hr per unit

    = 650 * 4 = 2600 hrs

(2600 – 3600) * 9 = 9000 (U)

Direct Labour cost variance = Direct Labour Rate Variance + Direct Labour Efficiency Variance

    = 1080(U) + 9000(U) = 10080(U)

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