Sawyer Industries, Inc. (SII), developed standard costs for direct material and

Question

Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75 per hour.

1) July's direct material flexible-budget variance is: A) $1,400 unfavorable B) $21,100 favorable C) $2,500 unfavorable D) None of these answers are correct.

2) July's direct material price variance is: A) $1,400 favorable B) $1,100 favorable C) $2,500 unfavorable D) None of these answers are correct.

3) July's direct material efficiency variance is: A) $1,400 unfavorable B) $1,100 favorable C) $2,500 unfavorable D) None of these answers are correct.

4) July's direct manufacturing labor flexible-budget variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 unfavorable D) None of these answers are correct.

5) July's direct manufacturing labor price variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 favorable D) None of these answers are correct.

6) July's direct manufacturing labor efficiency variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 favorable D) None of these answers are correct.

Explanation / Answer

Actual Production= 5000 Unit

Actual Labour Hrs. =525 Hrs.

Actual Material =1100 pounds

1- A) $1,400 unfavorable

   Material Flexible Varriance =(SQ*SP)- (AQ*AP)

= (1000*25)- (1100*24) = -$1400   

2- B) $1,100 favorable

   Material Price Varriance= (SP-AP)*AQ

= (25-24)*1100 =$1100

3 - C) $2,500 unfavorable

   Material EFFICIENCY Varriance= (SQ-AQ)*SP

= (1000-1100)*25 = -2500

4- C) $243.75 unfavorable

Direct manufacturing labor flexible-budget variance = Standard Cost- Actual Cost

= (.10*5000*15) -(525*14.75) = -$243.75

5- B) $131.25 favorable

   Labour Rate Varriance= (SR-AR)*AHrs.

= (15-14.75)*525= $131.25

6-C) $243.75 favorable

   Labour Efficiency Varriance= (SH*SR)- (AH*SR)

= 7500-7743.75 = -$243.75

Standard Actual Direct Material 0.20 Pound 0.22 Material Price $25.00 $24.00 Direct Labour 0.10 Hrs. 0.105 D. Labour Rate $15.00 14.75

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