Compute the cost and efficiency variances for direct materials and direct labor.

Question

Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Bargain ?Fender's managers have been making? trade-offs? Explain.

Bargain Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 142,000 square feet of extruded vinyl purchased at $1.50 per square foot. Production required 420 direct labor hours that cost $15.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.55 per square foot. The labor standard was 0.023 direct labor hour per fender, at a standard cost of $14.00 per hour Read the requirement Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost, AQ actual quantity, FOH -fixed overhead, SC standard cost, SQ standard quantity.) Formula Variance

Explanation / Answer

Direct material price variance = (SP-AP)AQ

= (1.55-1.50)*142000

Direct material price variance = 7100 F

Direct material efficiency variance = (SQ-AQ)SR
= (20000*7-142000)*1.55

Direct material efficiency variance = 3100 U

Direct labour price variance = (SR-AR)AH

= (14-15)*420

Direct labour price variance = 420 U

Direct labour efficiency variance = (SH-AH)SR

= (20000*.023-420)*14

Direct labour efficiency variance = 560 F

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.