French Company manufactures a line of upholstered chairs, and has given you the
ID: 2445047 • Letter: F
Question
French Company manufactures a line of upholstered chairs, and has given you the following information:
Standards per chair
Direct materials 2 square yards of material at $10 per square yard
Direct manufacturing labor .5 hour of labor at $20 per hour
The following data were compiled regarding actual performance:
Actual chairs produced 20,000 chairs
Square yards of material purchased and used 37,000 square yards
Purchase price per square yard $10.20
Direct manufacturing labor costs $176,400
Actual labor hours 9,000
Labor price per hour $19.60
a. Show computations for the direct material and direct labor variances. Give a plausible explanation of why each variance may have occurred.
b. Suppose 60,000 square yards of material were purchased (at $10.20 per square yard), even though only 37,000 square yards were used. Compute the direct material variances using this information.
Explanation / Answer
Standard Direct material 2 square yards of material at $10 per square yard Direct manufacturing labor .5 hour of labor at $20 per hour Actual Actual Standard Variance Actual chairs produced 20,000 Square yard of material purchased 37,000 40,000 3,000 Favorable purchase price per square yard 10.20 10 Direct manufacturing labor cost 176,400 200,000 23,600 Favorable Actual labor hours 9,000 10,000 Labor price per hour 19.60 20
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