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cornerstones 3rd eddition by Hansen, Don R problem #2 Sparingly Manufacturing ha

ID: 2462129 • Letter: C

Question

cornerstones 3rd eddition by Hansen, Don R

problem #2

Sparingly Manufacturing has developled the following standards for one of its products.

STANDARD VARIABLE COST CARD (One Unit of Product)

Material: 5yards x $6 per yard                                                      $30.00

Direct labor: 2hours x $8 per hour                                                 16.00

Variable manufacturing overhead: 2 hours x $5 per hour            10.00

Total standard variable cost per unit                                               56.00

The company records materials price variances at the time of purchase.

The following activity occurred during the month of December:

Materials purchased:                                  5,200 yards costing $29,900

Materials used:                                            4,750 yards

Units produced:                                          1,000 units

Direct labor:                                               2,100 hours costing $17,850

Required:

a.  calculate the direct materials price variance.       

b.  calculate the direct materials usage variance.

c.  calculate the direct labor rate variance.

d.  calculate the direct labor efficiency variance.      

thank you in advance for your help.                                                                                                                                                                           

Explanation / Answer

Material price variance = (Actual price - Standard price) x Actual quantity

=(5.75-6)*4750

=1187.5 (F)

Material usage variance = (Actual unit usage - Standard unit usage) x Standard cost per unit

=(4750-5000)*6

=1500 (F)

Labour rate variance = (Actual rate - Standard rate) x Actual hours worked

=(8.5-8)*2100

=1050 (A)

Labour efficiency variance = (Actual hours - Standard hours) x standard rate per hour

=(2100-2000)*8

=800 (A)

Standard (1 units)

Standard (1000 units)

Actual (1000 units)

Units

Rate

Total

Units

Rate

Total

Units

Rate

Total

Material

5

6

30

5000

6

30000

4750

5.75

27312.5

Direct labour

2

8

16

2000

8

16000

2100

8.5

17850

Standard (1 units)

Standard (1000 units)

Actual (1000 units)

Units

Rate

Total

Units

Rate

Total

Units

Rate

Total

Material

5

6

30

5000

6

30000

4750

5.75

27312.5

Direct labour

2

8

16

2000

8

16000

2100

8.5

17850