Problem 2 Maksy Manufacturing uses a standard cost accounting system and produce

Question

Problem 2

Maksy Manufacturing uses a standard cost accounting system and produced 32,000 units this past year. Each unit took several pounds of direct materials and 1.25 standard hours of direct labor at a standard hourly rate of $ 12.00. Budgeted activity was 50,000 direct labor hours. During the year, 133,000 pounds of raw materials were purchased at $0.92 per pound and used in the production. (Hint: Set up the 3-column format to compute variances; input the numbers given and back into the unknown amounts. Have fun!)

a.   If the direct materials cost variance was $ 3,990 favorable, what was the standard materials cost per pound?

b.   If the direct materials efficiency variance was $ 1,710 unfavorable, what was the standard materials quantity per unit?

c.   What were the standard hours allowed for the units produced?

d.   If the direct labor efficiency variance was $ 7,200 unfavorable, what were the actual direct labor hours worked?

e.   If the direct labor cost variance was $ 6,090 favorable, what was the actual rate per hour?

Explanation / Answer

(a)

Direct material cost variance

= Standard cost x Actual quantity - Actual cost

So, $ 3,990 = Standard cost x 133,000 - 133,000 x $ 0.92

So, $ 3,990 + $ 122,360 = Standard cost x 133,000

So, Standard Cost = $ 126,350/133,000

= $ 0.95 per unit

(b)

Direct material efficiency variance

= Actual Quantity x Standard Price - Standard Quantity x Standard Price

So, $ 1,710 = 133,000 x $ 0.95 - Standard Quantity x $ 0.95

So, Standard Quantity x $ 0.95 = $ 124,640

So, Standard Quantity = $ 124,640/ $ 0.95

= 131,200 units

(c)

Standard hours allowed for units produced

= Standard hours per unit x Number of units produced

= 1.25 x 32,000 units

= 40,000 hours

(d)

Direct labor efficiency variance

= Actual Hours x Standard Rate - Standard Hours x Standard Rate

=So, $ 7,200 = Actual hours x $ 12 - 40,000 x $ 12

So, Actual hours = 40,600 hours

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