Amber Company produces iron table and chair sets. During October, Amber\'s costs
ID: 2522305 • Letter: A
Question
Amber Company produces iron table and chair sets. During October, Amber's costs were as follows: Actual purchase price Actual direct labor rate Standard purchase price Standard quantity for sets produced Standard direct labor hours al lowed Actual quantity purchased in October Actual direct labor hours Actual quantity used in October Direct labor rate variance 5 1.30 per lb 5 6.50 per hour 5 1.10 per lb. 870,000 lbs 1,015,000 lbs. 900,000 lbs. 15,000 7,000 $4,500 F 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"or faorable, "U" for unfavorable.) 4. Compute the standard direct labor rate for October. (Round your answer to 2 decimal places.) Direct L Rate 5. Compute the direct labor efficiency variance for October. (Round your intermediate calculation to 2 decimal places. Indicate the effect of each variance by selecting"F" for favorable,"U" for unfavorable.)Explanation / Answer
1. Total purchases = $1.30 x 1,015,000 = $1,319,500
2. Direct material price variance = (Standard price - Actual price) x Quantity purchased
= ($1.10 - $1.30) x 1,015,000 = $203,000 Unfavorable
3. Direct material quantity variance = (Standard quantity - Actual quantity used) x Standard price
= (870,000 - 900,000) x $1.10 = $33,000 Unfavorable
4. Direct labor rate variance = (Standard direct labor rate - Actual direct labor rate) x Actual labor hours
$4,500 = (Standard direct labor rate - $6.50) x 7,000
Standard direct labor rate = $7.14
5. Direct labor efficiency variance = (Standard hours - Actual hours) x Standard rate
= (15,000 - 7,000) x $7.14 = $57,120 Favorable
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