EXERCISE 11-9. Calculating Material and Labor Variances [LO 1] Star Band Uniform

Question

EXERCISE 11-9. Calculating Material and Labor Variances [LO 1] Star Band Uniforms uses a standard costing system. The standard material and labor costs for producing a marching band hat are as follows: Materials (.90 yards x $12.00) Direct labor (1.2 hours x$14.00) $10.80 $16.80 During May, the company produced 3,550 band hats; 4,000 yards of material were purchased for $42,000, and 3,100 yards of material were used in production. Also during May, 4,450 direct labor hours were worked at a cost of S62,000. Calculate material price and quantity variances and labor rate and efficiency variances. Indicate whether the variances are favorable or unfavorable.

Explanation / Answer

Formula material Price Variance (Standard Price - Actual Price)*Actual Qty. material Price Variance = (12- 42000/4000)*3100        4,650 Favorable Formula material Qty. Variance (Standard Qty- Actual Qty.)*Standard Price material Qty. Variance = (0.90*3550-3100)*12        1,140 Favorable = Labor rate Variance = (standard Rate- Actual rate)*Actual hours Labor rate Variance (14-62000/4450)*4450           300 favorable Direct Labor Efficiency variance = (Standard Hour - Actual Hour)*Standard rate Direct Labor Efficiency variance (1.2 -4450/3550)*14        2,660 Unfavorable

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