At the beginning of October, Cornerstone Printers Company budgeted 16,000 books

Question

At the beginning of October, Cornerstone Printers Company budgeted 16,000 books to the printed in October at standard direct materials and direct labor costs as follows The standard materials price is $0.60 per pound. The standard direct labor rate is $10 per hour. At the end of October, the actual direct materials and direct labor costs were as follows: There were no direct materials price or direct labor rate variances for October. In addition, assume no changes in the direct materials inventory balances in October. Cornerstone Printers Company actually produced 14.000 units during October. Determine the direct materials quantity and direct labor time variances.

Explanation / Answer

Since there is no Material Price Variance, it means , Standard Rate = Actual Rate Hence Standard Quantity 24,000 / 0.6 40000 Actual Quantity 21,600 / 0.6 36000 Material Quantity Variance is given by the formula : 0.6 ( 40,000 -36,000) Standard Price (Standard Quantity - Actual Quantity) 1600 (Favorable ) Material Quantity Variance 1600 (Favorable ) Since there is no Labor Rate Variance, it means , Standard Rate = Actual Rate Hence Standard Hours 8,000/10 800 Actual Labor Hours 7,200/10 720 Labor Time Variance is given by the following formula : Standard Labor Rate ( Standard Hours - Actual Hours ) 10(800-720) Labor Time Variance 800(Favorable)

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