Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 p

Question

Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 pillowcases, using 27,000 yards of fabric costing $3.05 per yard and incurring direct labor costs of $17,752 for 3,170 hours of direct labor. The standard cost per pillowcase assumes 1.75 yards of fabric at $3.10 per yard, and 0.20 hours of direct labor at $5.95 per hour. a. Compute both the price variance and quantity variance relating to direct materials used in the manufacture of pillowcases in May. b. Compute both the rate variance and efficiency variance for direct labor costs incurred in manufacturing pillowcases in May. (For all requirements, Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)

a. Materials price variance Materials quantity variance b. Labor rate variance Labor efficiency variance

Explanation / Answer

SQ 26250 15000*1.75 SP 3.1 AQ 27000 AP 3.05 Material Price Variance: ( AQ X AP ) Minus ( AQ X SP ) 27000 X 3.05 ) Minus ( 27000 X 3.1 ) 82350 Minus 83700 = -1350 Favourable Material Quantity Variance: ( AQ X SP ) Minus ( SQ X SP ) 27000 X 3.1 ) Minus ( 26250 X 3.1 ) 83700 Minus 81375 = 2325 UnFavourable SH 3000 15000*0.20 SR 5.95 AH 3170 AR 5.6 17752/3170 Labour Rate Variance: ( AH X AR ) Minus ( AH X SR ) 3170 X 5.6 ) Minus ( 3170 X 5.95 ) 17752 Minus 18862 = -1110 Favourable Labour Efficiency Variance: ( AH X SR ) Minus ( SH X SR ) 3170 X 5.95 ) Minus ( 3000 X 5.95 ) 18862 Minus 17850 = 1012 UnFavourable

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