The following information pertains to Skandalis Company\'s production of one uni
ID: 2472736 • Letter: T
Question
The following information pertains to Skandalis Company's production of one unit of its manufactured product during the month of June:
Standard quantity of materials
10 lbs.
Standard cost per lb.
$.85
Standard direct labor hours
.5
Standard wage rate per hour
$12.00
Materials purchased
200,000 lbs.
Cost of materials purchased
$.82 per lb.
Materials consumed for manufacture of 10,000 units
112,000 lbs.
Actual direct labor hours required for 10,000 units
4,600
Actual direct labor cost per hour
$12.25
(a) The materials price variance is recognized when materials are purchased. Compute materials price and quantity variances and labor rate and efficiency variances.
Standard quantity of materials
10 lbs.
Standard cost per lb.
$.85
Standard direct labor hours
.5
Standard wage rate per hour
$12.00
Materials purchased
200,000 lbs.
Cost of materials purchased
$.82 per lb.
Materials consumed for manufacture of 10,000 units
112,000 lbs.
Actual direct labor hours required for 10,000 units
4,600
Actual direct labor cost per hour
$12.25
Explanation / Answer
1
Calculation of Materials Price Variance :
Formula :
Materials Price Variance = (Actual Price - Standard Price )* Actual Quantity
Actual price
$.82 per lb.
Standard price
$.85 per lb.
Actual quantity
200,000 lbs.
Materials Price Variance = (0.82-0.85)*200000 =
$ 6000 Favorable
2
Calculation of Materials Quantity Variance :
Formula :
Materials Quantity Variance = (Actual Quantity - Standard Quantity )* Standard Price
Actual quantity
112000 lbs.
Standard quantity (10000 Units * 10 lbs.)
100000 lbs.
Standard price
$.85 per lb.
Materials Quantity Variance = (112000 - 100000 )* 0.85
$10200 Unfavorable
3
Calculation of Labor Rate Variance :
Formula :
Labor Rate Variance = (Actual Rate - Standard Rate )* Actual Hours
Actual Rate
$12.25 Per hour
Standard Rate
$12.00 Per hour
Actual Hours
4600 Hours
Labor Rate Variance = (12.25-12)*4600
$1150 Unfavorable
2
Calculation of Labor Efficiency Variance :
Formula :
Labor Efficiency Variance = (Actual Hours - Standard Hours )* Standard Rate
Actual Hours
4600 Hours
Standard Hours (10000 Units * 0.5 hours)
5000 Hours
Standard Rate
$12.00 Per hour
Labor Efficiency Variance = (4600-5000)*12
$4800 Favorable
1
Calculation of Materials Price Variance :
Formula :
Materials Price Variance = (Actual Price - Standard Price )* Actual Quantity
Actual price
$.82 per lb.
Standard price
$.85 per lb.
Actual quantity
200,000 lbs.
Materials Price Variance = (0.82-0.85)*200000 =
$ 6000 Favorable
2
Calculation of Materials Quantity Variance :
Formula :
Materials Quantity Variance = (Actual Quantity - Standard Quantity )* Standard Price
Actual quantity
112000 lbs.
Standard quantity (10000 Units * 10 lbs.)
100000 lbs.
Standard price
$.85 per lb.
Materials Quantity Variance = (112000 - 100000 )* 0.85
$10200 Unfavorable
3
Calculation of Labor Rate Variance :
Formula :
Labor Rate Variance = (Actual Rate - Standard Rate )* Actual Hours
Actual Rate
$12.25 Per hour
Standard Rate
$12.00 Per hour
Actual Hours
4600 Hours
Labor Rate Variance = (12.25-12)*4600
$1150 Unfavorable
2
Calculation of Labor Efficiency Variance :
Formula :
Labor Efficiency Variance = (Actual Hours - Standard Hours )* Standard Rate
Actual Hours
4600 Hours
Standard Hours (10000 Units * 0.5 hours)
5000 Hours
Standard Rate
$12.00 Per hour
Labor Efficiency Variance = (4600-5000)*12
$4800 Favorable
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