Levine Inc., which produces a single product, has prepared the following standar

Question

Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product Direct materials (9 pounds at $1.90 per pound) $17.10 $40.00 Direct labor (4 hours at $10.00 per hour) During the month of April, the company manufactures 160 units and incurs the following actual costs. Direct materials purchased and used (2,100 pounds) $4,410 $6,664 Direct labor (680 hours) Compute the total, price, and quantity variances for materials and labor. Total materials variance Materials price variance Materials quantity variance s Total labor variance Labor price variance Labor quantity variance

Explanation / Answer

Materials Variance:

Actual direct materials cost = $4,410
Actual direct materials used = 2,100 pounds

Standard direct materials allowed = Actual Output * Standard direct materials per unit
Standard direct materials allowed = 160 units * 9 pounds per unit
Standard direct materials allowed = 1,440 pounds

Standard direct materials cost per pound = $1.90

Standard direct materials cost = Standard direct materials cost per pound * Standard direct materials allowed
Standard direct materials cost = 1,440 * $1.90
Standard direct materials cost = $2,736

Total Materials Variance = Actual direct materials cost - Standard direct materials cost
Total Materials Variance = $4,410 - $2,736
Total Materials Variance = $1,674 Unfavorable

Materials Price Variance = Actual direct materials cost - Actual direct materials used * Standard direct materials cost per pound
Materials Price Variance = $4,410 - 2,100 * $1.90
Materials Price Variance = $420 Unfavorable

Materials Quantity Variance = Actual direct materials used * Standard direct materials cost per pound - Standard direct materials cost
Materials Quantity Variance = 2,100 * $1.90 - $2,736
Materials Quantity Variance = $1,254 Unfavorable

Labor Variance:

Actual direct labor cost = $6,664
Actual direct labor hours = 680

Standard direct labor hours allowed = Actual Output * Standard direct labor hours per unit
Standard direct labor hours allowed = 160 units * 4 hours per unit
Standard direct labor hours allowed = 640

Standard direct labor rate per hour = $10.00

Standard direct labor cost = Standard direct labor rate per hour * Standard direct labor cost allowed
Standard direct labor cost = 640 * $10.00
Standard direct labor cost = $6,400

Total Labor Variance = Actual direct labor cost - Standard direct labor cost
Total Labor Variance = $6,664 - $6,400
Total Labor Variance = $264 Unfavorable

Labor Rate Variance = Actual direct labor cost - Actual direct labor hours * Standard direct labor rate per hour
Labor Rate Variance = $6,664 - 680 * $10.00
Labor Rate Variance = $136 Favorable

Labor Efficiency Variance = Actual direct labor hours used * Standard direct labor rate per hour - Standard direct labor cost
Labor Efficiency Variance = 680 * $10.00 - $6,400
Labor Efficiency Variance = $400 Unfavorable

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