Thompson Company uses a standard cost system for its single product The followin
ID: 2402643 • Letter: T
Question
Thompson Company uses a standard cost system for its single product The following data is available for the month of May 2017:
Standards per unit of product:
Direct materials 3 pounds at $8 per yard
Direct labor 1.5 hours at $14 per hour
Actual experience for the current year:
Purchases of raw materials (15,000 pounds ) $124,500
Raw materials used $12,000 pounds
Direct labor costs (6,720) $95,760
Units produced 4200
Required: Complete a table and state how well direct material and direct labor costs were controlled in the month of May.
Explanation / Answer
Answer
----Standard data and actual data for 4200 units
Actual DATA for
4200
units
Quantity (AQ)
Rate (AR)
Actual Cost
[A]
[B]
[A x B]
Direct Material
12000 pounds used
$ 8.30 [$124,500/15000 pounds]
$ 99,600.00
Direct labor
6720 hours
$ 14.25 [$95,760 / 6720]
$ 95,760.00
Standard DATA for
4200
units
Quantity (SQ)
Rate (SR)
Standard Cost
[A]
[B]
[A x B]
Direct Material
12600 pounds [4200 units x 3 pounds]
$ 8.00
$ 100,800.00
Direct labor
6300 hours [4200 units x 1.5 hours]
$ 14.00
$ 88,200.00
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quantity
(
$ 8.00
-
$ 8.30
)
x
12000
-3600
Variance
$ 3,600.00
Unfavourable-U
Material Quantity Variance
(
Standard Quantity
-
Actual Quantity
)
x
Standard Rate
(
12600
-
12000
)
x
$ 8.00
4800
Variance
$ 4,800.00
Favourable-F
Material Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 100,800.00
-
$ 99,600.00
)
1200
Variance
$ 1,200.00
Favourable-F
Labor Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 14.00
-
$ 14.25
)
x
6720
-1680
Variance
$ 1,680.00
Unfavourable-U
Labour Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
6300
-
6720
)
x
$ 14.00
-5880
Variance
$ 5,880.00
Unfavourable-U
Labor Spending Variance
(
Standard Cost
-
Actual Cost
)
(
$ 88,200.00
-
$ 95,760.00
)
-7560
Variance
$ 7,560.00
Unfavourable-U
Actual DATA for
4200
units
Quantity (AQ)
Rate (AR)
Actual Cost
[A]
[B]
[A x B]
Direct Material
12000 pounds used
$ 8.30 [$124,500/15000 pounds]
$ 99,600.00
Direct labor
6720 hours
$ 14.25 [$95,760 / 6720]
$ 95,760.00
Standard DATA for
4200
units
Quantity (SQ)
Rate (SR)
Standard Cost
[A]
[B]
[A x B]
Direct Material
12600 pounds [4200 units x 3 pounds]
$ 8.00
$ 100,800.00
Direct labor
6300 hours [4200 units x 1.5 hours]
$ 14.00
$ 88,200.00
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