Consider the following data collected for Great Homes Inc.: Requirement Compute

Question

Consider the following data collected for Great Homes Inc.: Requirement Compute the price, efficiency, and flexible-budget variances for direct materials and direct manufacturing labour. Requirement. Compute the price, efficiency, and flexible-budget variances for direct materials. Label each variance as favourable (F) or unfavourable (U). Price variance Efficiency variance Flexible-budget variance Compute the price, efficiency, and flexible-budget variances for direct manufacturing labour. Label each variance as favourable (F) or unfavourable (U). Price variance Efficiency variance Flexible-budget variance

Explanation / Answer

Material price variance = (standard price-actual price) * actual quantity    

                                          = (standard price*actual quantity)-(actual price * actual quantity)

                                         = 214000-200000

                                         = F14000        

Material efficiency variance = (actual quantity-standard quantity)*standard price

                                                   = (actual quantity*standard price)-(standard quantity*standard price)

                                                  =(214000)-(225000)

                                                  = -11000

                                                 =11000F

Flexible budget variance = standard material cost-actual material cost

                                            = 225000-200000

                                             =25000F

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