New Jersey Valve Company manufactured 7,900 units during January of a control va

Question

New Jersey Valve Company manufactured 7,900 units during January of a control valve used by milk processors in its Camden plant. Records indicated the following:

The control valve has the following standard prime costs:

Required:

Prepare a schedule of standard production costs for January, based on actual production of 7,900 units.

For the month of January, compute the following variances.

Direct labor 40,600 hr. at $14.20 per hr. Direct material purchased 24,000 lb. at $2.10 per lb. Direct material used 26,800 lb.

Explanation / Answer

Standard costs Direct materials 63200 =7900*8 Direct labor 584600 =7900*74 Total standard production costs 647800 Direct material price variance=26800*(2.1-2)= $2680 Unfavorable Direct material quantity variance=2*(26800-7900*4)= $9600 Favorable Direct material purchase price variance=24000*(2.1-2.1)= $2400 Unfavorable Direct labor rate variance=40600*(14.2-14.8)= $24360 Favorable Direct labor efficiency variance=14.8*(40600-7900*5)= $16280 Unfavorable

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