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.

Do not round final answers.

(b) Determine the labor rate and efficiency variances.

Standard cost per unit Direct materials 4 units of material A × $2.00 per unit 1 unit of material B × $3.00 per unit Direct labor 3 hours × $8.00 per hour Activity for September Materials purchased Material A 2,600 units × $2.05 per unit Material B 700 units × $3.10 per unit Materials used Material A 2,250 units Material B 605 units Direct labor used 1,480 hours × $8.30 per hour Production output 500 units

Explanation / Answer

Solution a:

Material A:

Standard price of material A = $2

Actual price of material A = $2.05

Actual quantity purchased = 2600 units

Actual quantity used = 2250 units

Standard quantity of material = 500 * 4 = 2000 units

Material price variance = (SP - AP) * AQ purchased = ($2 - $2.05) * 2600 = $130 U

Material quantity variance = (SQ - AQ) * SP = (2000 - 2250) * $2 = $500 U

Material B:

Standard price of material B = $3

Actual price of material B = $3.10

Actual quantity purchased = 700 units

Actual quantity used = 605 units

Standard quantity of material = 500 * 1 = 500 units

Material price variance = (SP - AP) * AQ purchased = ($3 - $3.10) * 700 = $70 U

Material quantity variance = (SQ - AQ) * SP = (500 - 605) * $3 = $315 U

Solution b:

Standard rate of direct labor = $8

Actual rate of direct labor = $8.30

Actual hours of direct labor = 1480 hours

Standard hours of direct labor = 500 * 3 = 1500 units

Direct labor rate variance = (SR - AR) * AH = ($8 - $8.30) * 1480 = $444 U

Direct labor efficiency variance = (SH - AH) * SR = (1500 - 1480) * $8 = $160 F

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