Amber Company produces iron table and chair sets. During October, Amber’s costs

Question

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows:

Calculate the total cost of purchases for October.

Compute the direct materials price variance based on quantity purchased. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Calculate the direct materials quantity variance based on quantity used. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Compute the standard direct labor rate for October. (Round your answer to 2 decimal places.)

Compute the direct labor efficiency variance for October. (Round your intermediate instruction 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Amber Company produces iron table and chair sets. During October, Amber’s costs were as follows:

Required: 1.

Calculate the total cost of purchases for October.

2.

Compute the direct materials price variance based on quantity purchased. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

3.

Calculate the direct materials quantity variance based on quantity used. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

4.

Compute the standard direct labor rate for October. (Round your answer to 2 decimal places.)

5.

Compute the direct labor efficiency variance for October. (Round your intermediate instruction 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Actual purchase price Actual direct labor rate Standard purchase price Standard quantity for sets produced Standard direct labor hours allowed Actual quantity purchased in October Actual direct labor hours Actual quantity used in October Direct labor rate variance $ 1.70 per lb. $ 6.90 per hour $1.50 per lb. 910,000 lbs. 1,055,000 Ibs. 940,000 lbs. 15,000 11,000 4,900 F

Explanation / Answer

1.

Total cost of purchases = Actual quantity purchased * Actual purchase price = 1,055,000 lbs. * $1.70 per lb. = $1,793,500

2.

Materials price variance = Actual quantity purchased * (Actual price – Standard price) = 1,055,000 * ($1.70 - $1.50) = $211,000 U

3.

Materials quantity variance = Standard purchase price * (Actual quantity used - Standard quantity for actual production) = $1.50 * (940,000 – 910,000) = $45000 U

4.

Direct labor rate variance = Actual direct labor hours (Actual rate – Standard rate)

-$4,900 = 11,000 * ($6.90 – Standard rate)

$6.90 – Standard rate = -$4,900/11,000 = -$0.45

Standard rate = $6.90 + $0.45 = $7.35 per labor hour

5.

Direct labor efficiency variance = Standard rate * (Actual hours – Standard hours) = $7.35 * (11,000 – 15,000) = $29,400 F

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