Diamond Company produces a single product. The company has set the following sta

Question

Diamond Company produces a single product. The company has set the following standards for materials and labor: During the past month, the company purchased 14,600 pounds of direct materials at a cost of $24,820. All of this material was used in the production of 2,300 units of product. Direct labor cost totaled $85,000 for the month. The following variances have been computed: Required: For direct materials: Compute the standard price per pound of materials. Compute the standard quantity allowed for materials for the month's production. Compute the standard quantity of materials allowed per unit of product. For direct labor: Compute the actual direct labor hours for the month. Compute the labor rate variance.

Explanation / Answer

Standard price per pound = Actual price + 2780 which is favorbale variance

= 24820 + 2780 / 14600

= $ 1.89 per pound

Stndard quamnity of materials allowed for months prodution

= Actual quantity - the unfavorable variance

= 14,600 -1600

= 13,000 pounds

Standard quantity per unit

= 13,000 / 2300

= 5.65 pounds

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