Amber Company produces iron table and chair sets. During October, Amber’s costs

Question

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows:

Compute the direct materials price variance based on quantity purchased. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Calculate the direct materials quantity variance based on quantity used. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Compute the standard direct labor rate for October. (Round your answer to 2 decimal places.)

Compute the direct labor efficiency variance for October. (Round your intermediate instruction 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

  Actual purchase price $ 1.90 per lb.   Actual direct labor rate $ 7.10 per hour   Standard purchase price $ 1.70 per lb.   Standard quantity for sets produced 930,000 lbs.   Standard direct labor hours allowed 15,000   Actual quantity purchased in October 1,075,000 lbs.   Actual direct labor hours 8,000   Actual quantity used in October 960,000 lbs.   Direct labor rate variance 5,100 F

Explanation / Answer

Answer 1:

Total cost of purchases = Actual quantity purchased in October * Actual purchase price = 1,075,000 * $ 1.90

= $20,42,500

Answer 2:

Direct materials price variance (based on quantity purchased) = Actual quantity purchased in October * ( Standard purchase price - Actual purchase price)

= 1,075,000 * ($ 1.70 - $ 1.90) = - $ 215,000 or $ 215,000 U

Answer 3:

Direct materials quantity variance based on quantity used = Standard purchase price * ( Standard quantity - Actual quantity used)

= $ 1.70 * (930,000 - 960,000) = -$ 51,000 or $ 51,000 U

Answer 4:

Standard direct labor rate for October :

Direct labor rate variance = Actual hours of direct labor (Standard Rate - Actual Rate)

5 100 = 8,000 * ( Standard Rate - $ 7.10 )

Standard Rate = 56,800 + 5,100 / 8,000 = $7.74

Answer 5:

Direct labor efficiency variance for October = Standard Rate * (Standard hours - Actual hours)

= 7.74 ( 15,000 - 8,000) = +$ 54,162.50 or $ 54,162.50 F

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