Computation of Variable Cost Variances The following information pertains to the

Question

Computation of Variable Cost Variances

The following information pertains to the standard costs and actual activity for Tyler Company for September:

There were no beginning direct materials inventories.

(a) Determine the materials price and quantity variances.

(b) Determine the labor rate and efficiency variances.

Standard cost per unit Direct materials 4 units of material A x $ 3.00 per unit 1 unit of material B x $ 4.00 per unit Direct labor 3 hours x $ 9.00 per hour Activity for September Materials purchased Material A 4,500 units x $ 3.10 per unit Material B 1,100 units x $ 4.15 per unit Materials used Material A 4,150 units Material B 1,005 units Direct labor used 2,950 hours x $ 9.40 per hour Production output 1,000

Explanation / Answer

a) At the time of purchase Material A Direct Material Price Variance = Actual Quantity * Actual Price - Actual Quantity * standard price               = (4500 * 3.10 ) - ( 4500 *3)                = 450 UF Material B Direct Material Price Variance = Actual Quantity * Actual Price - Actual Quantity * standard price               = ( 1100 * 4.15) - ( 1100 * 4)                 = 165 UF At the time of consumption Material A Direct Material Price Variance = Actual Quantity * Actual Price - Actual Quantity * standard price               = (4150 * 3.10 ) - ( 4150 *3)                = 415 UF Material B Direct Material Price Variance = Actual Quantity * Actual Price - Actual Quantity * standard price               = ( 1005 * 4.15) - ( 1005 * 4)                 = 150.75 UF Material A Direct Material Quantity Variance = (Standard quantity allowed - Actual Quantity used) * standard price                       = ( 1000 * 4 - 4150) * 3                        = ( 4000 - 4150) * 3 = -150 * 3 = -450 UF Material B Direct Material Quantity Variance = (Standard quantity allowed - Actual Quantity used) * standard price                       = ( 1000 * 1 - 1005) * 4                        = ( 1000 - 1005) * 4                        = -5 * 4 = -20 UF b) Labor Rate Variance = Actual Quantity * Actual Rate - Actual Quantity * standard rate = 2950 * 9.40 - 2950 * 9                                           = 1180 UF Labor efficiency variance = (standard labor hours allowed - actual direct labor hours used) * standard direcy labor rate     = ( 3 *!000 - 2950) * 9     = (3000 -2950) * 9      = 50 * 9      = 450 F

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