Canandaigua Container Company manufactures recyclable soft-drink cans. A unit of

Question

Canandaigua Container Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct Labor Direct Material Quantity, 0.18 hour Quantity, 7 kilograms Rate, $9.00 per hour kilogram Actual material purchases amounted to 234,000 kilograms at $0.525 per kilogram. Actual costs incurred in the production of 26,000 units were as follows Direct labor: $46,930 for 4,940 hours Direct material: kilograms $102,375 for 195,000

Explanation / Answer

Material Quantity Variance (Standard quantity - Actual quantity)*standard rate =(26000*7-195000)*0.46 -5980 Adverse Labor efficiency Variance =(Standard hours required-Actual Hour)*Standard rate per hour =(26000*0.18-4940)*9 -2340 Adverse Material Purchase Price Variance =Standard cost-Actual cost =26000*7*.46-102375 -18655 Adverse Labor rate variance =Standard cost - Actual cost =26000*0.18*9-46930 -4810 Adverse Raw Material Inventory Accounts payable 122850 Work in process Inventory 83720 Work in Process Inventory Raw Material Inventory 83720 Direct labor 42120 Cost of goods sold 125840 Accounts Payable Raw Material Inventory 122850 Wages Payable Wages 46930 Cost of goods sold Work in Process Inventory 125840 Direct materials purchase price variance 18655 Direct material quantity variance 5980 Direct labor rate variance 4810 Direct labor effiecncy variance 2340 Direct materials purchase price variance Cost of goods sold 18655 Direct material quantity variance Cost of goods sold 5980 Direct labor rate variance Cost of goods sold 4810 Direct labor effiecncy variance Cost of goods sold 2340 Note : Instead of debiting cost of goods sold for various variances, one may debit it to Costing Profit & Loss Account

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