Ayala Corporation accumulates the following data relative to jobs started and fi

Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014. Overhead is applied on the basis of standard machine hours. 3.10 hours of machine time are required for each direct labor hour. The jobs were sold for $496,000. Selling and administrative expenses were $42,200. Assume that the amount of raw materials purchased equaled the amount used. Compute all of the variances for (1) direct materials and (2) direct labor. (Round answers to 0 decimal places, e.g. 125.)

Explanation / Answer

Total Material Variance = ( Stanadard Cost - Actual Cost)

= ( (11500*4.20)-(10870*4.07))

= ( 48300-44241) i.e 4059 Favourable

Total Material Price Variance = ( Standard Price - Actual Price ) * Actual Units

= ( 4.20-4.07)*10870 i.e 1413 Favourable

Total Material Quantity Variance = ( Standard Units - Actual Units) * Standard Price

= ( 11500-10870)*4.20 i.e 2646 Favourable

Total Labor cost variance = ( Standard Cost - Actual Cost)

= ( 168370-162032) i.e 6338 Favourable

Total Labor rate variance = ( Standard Rate - Actual Rate ) * Actual Hours

= ( 168370/14900-162032/15200)*14900

= ( 11.30-10.66)*14900 i.e 9536 Favourable

Total Labor Efficiency Variance = ( Standard Hours - Actual Hours) * Standard Rate

= ( 14900-15200)*11.30 i.e 3390 Unfavourable

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