The following information describes production activities of the Central Corp.:

ID: 2476730 • Letter: T

Question

Raw materials used 16,000 lbs. at $4.05 per lb.

Factory payroll 5,545 hours for a total of $72,085

30,000 units were completed during the year

Budgeted standards for each unit produced:

1/2 lb. of raw material at $4.15 per lb.

10 minutes of direct labor at $12.50 per hour

A. Compute the direct materials price variance

B. Compute the direct materials quantity variance

C. Compute the direct labor rate variance

D. Compute the direct labor efficiency variance

E. Indicate whether each variance is favorable or unfavorable.

Direct Material:

Direct Material Price variance = (Standard Price – Actual price) X Actual Quantity

=(4.15-4.05) x 16,000

=$1,600 F

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Standard Quantity= Standard Quantity required for actual production

=0.5 x 30,000=15,000 units

Direct Material Quantity variance

= (Standard Quantity – Actual Quantity) X Standard Price

= (15,000-16,000) x4.15

=$4,150 U

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Direct Labor:

Actual Rate = Actual Labor cost/ Actual hrs=$72,085/5,545=$13

Direct Labor Rate variance = (Standard Rate – Actual Rate) X Actual hrs

=(12.50 -13) x 5,545

=$2,772.5 U

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Standard hrs= Standard hrs require for Actual Production

=10 /60 hrs x 30,000=5,000 hrs

Direct Labor Efficiency variance = (Standard hrs – Actual hrs) X Standard rat Rate

=(5,000-5,545) x 12.50

=$6,812.5 U

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