I need help on 3 and 4. I did 4 but I don\'t know if I am right 3. Ruby Company

Question

I need help on 3 and 4. I did 4 but I don't know if I am right

3. Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of 9 50. During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance. 4. Japan Company produces lamps that require 2.25 standard hours per unit at an hourly rate of $15.00 per hour. If 7,700 units required 19,250 hours at an hourly rate of $14.90 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? o-

Explanation / Answer

Problem 3

Solution

Part a) Material Price Variance

Material Price Variance is the variance arises in the material cost due to difference in actual material purchase price from standard material price. Mathematically, it is calculated as below:

Material Price Variance = Actual Quantity (Standard Price – Actual Price)

Note --- Here actual quantity means actual quantity of material PURCHASED. If the question does not provide the information about material purchase, it is taken as equal to material consumed.

Direct Material Price Variance

Actual Price

$7.55

Per Yard

Standard Price

$7.50

Per Yard

Variance or Difference in Price

$0.05

Per Yard

x Actual Quantity PURCHASED

43600

Yards

Material Price Variance

$2,180

Unfavorable

Part b --- Material Quantity/Efficiency/Usage Variance

Material Efficiency (Usage) Variance measures variance in material cost due to usage/consumption of materials. It is calculated as below:

Material Quantity Variance = Standard Price (Standard Quantity for Actual Production – Actual Quantity USED)

Note --- Here actual quantity means actual quantity of material CONSUMED/USED

Direct Material Quantity Variance

Standard Quantity Allowed for actual production:

Actual Production/Activity

8500

Chairs

x Allowed Standard Quantity Per Unit

5

Yards

Total Standard Quantity Allowed for actual production (SQAP)

42500

Pounds

Actual Quantity USED (AQU)

43600

Pounds

Variance or Difference in Quantity

1100

Pounds

x Standard Price (SP)

$7.50

Per Pound

Material Quantity Variance

$8,250

Unfavorable

Part c—Material Cost Variance

Material Cost Variance = Material Price Variance $2,180 U + material Quantity Variance $8,250 U = $10,430 U

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.

Direct Material Price Variance

Actual Price

$7.55

Per Yard

Standard Price

$7.50

Per Yard

Variance or Difference in Price

$0.05

Per Yard

x Actual Quantity PURCHASED

43600

Yards

Material Price Variance

$2,180

Unfavorable

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