Hurren Corporation makes a product with the following standard costs: Inputs Kir

Question

Hurren Corporation makes a product with the following standard costs: Inputs Kirect materials Direct laber Variable overboard The company reported the following this product in June. origimally budgeted Actual output Raw materials used in production Actunl direct labor-hours Purchases of raw matcrials Actual dircet labor rate Actual variable overhead rate The company applies variable overhead on the The direct materials purchases variance is computed when the 25.The materials quntity variaece for june is. A.$1,760U B.$1,782F C.$1,760F D.$1,782R The materials price variance for june is: A.$3,180 U B.$2,860 F C.$2,860 U D.$3,180 F 27.The labor efficiency varlance for June is: A.$995 U B.$950 U C.$995 F D.$950 F

Explanation / Answer

Direct material quantity variance (also called the direct material usage/efficiency variance) is the product of standard price of a unit of direct material and the difference between standard quantity of direct material allowed and actual quantity of direct material used. The formula to calculate direct material quantity variance is:

Where,
   SQ is the standard quantity allowed
   AQ is the actual quantity of direct material used
   SP is the standard price per unit of direct material

Direct material price variance (also called the direct material spending/rate variance) is the product of actual quantity of direct material used and the difference between standard price and actual price per unit of direct material. It is calculated using the following formula:

Where,
   SP is the standard unit price of direct material
   AP is the actual price per unit of direct material
   AQ is the actual quantity of direct material used

Direct labor efficiency variance (also called direct labor quantity/usage variance) is the product of standard direct labor rate and the difference between the standard direct labor hours allowed and actual direct labor hours used. The basic concept of direct labor efficiency variance is similar to that of direct material quantity variance. The following formula is used to calculate direct labor efficiency variance:

Where,
   SH are the standard direct labor hours allowed
   AH are the actual direct labor hours used
   SR is the standard direct labor rate per hour

Plug in the values in the formula. you will get the answer.

The values in the attached picture is not clear.

DM Quantity Variance = ( SQ AQ ) × SP

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