Chemical, Inc., has set the following standards for direct materials and direct

Question

Chemical, Inc., has set the following standards for direct materials and direct labor for each 40-pound bag of Weed-Be-Doom:

                                                                                           Per Bag

Direct materials 30 pounds of XF-2000 @ $0.10/lb. =     $3.00

Direct labor: 0.1 hours @ $22/hr. =                                    2.20

The company manufactured 80,000 bags of Weed-Be-Doom in December using 2,500,000 pounds of XF-2000 and 7,400 direct labor-hours. The cost of the XF-2000 was $0.09 per pound and the total payroll for direct labor was $162,200.

Required:

Calculate the following variances and indicate whether each variance is favorable or unfavorable using F for favorable and U for unfavorable.

Direct-material price

Direct-material quantity

Direct-labor rate

Direct-labor efficiency

Direct-material price

Direct-material quantity

Direct-labor rate

Direct-labor efficiency

Explanation / Answer

Formula = (Actual price-Standard Price) * Actual Quantity (0.09-0.10)*2500000       = $25,000(F) Direct-material price (Actual Quantity - Standard Quantity) x Standard Price (2500000-2400000)*0.10=$10000(A) Direct-material quantity (Actual Rate-Standard Rate) * Actual Labour hours (162200/7400-22)*7400                                                = $600(F) Direct-labor rate (Actual hours-Standard hours) * Standard Rate (7400-80000*0.1)*22=                   $13200(F) Direct-labor efficiency

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