Exercise 25-7 Levine Inc., which produces a single product, has prepared the fol
ID: 2557952 • Letter: E
Question
Exercise 25-7 Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (9 pounds at $3.70 per pound) Direct labor (5 hours at $11.00 per hour) During the month of April, the company manufactures 340 units and incurs the following actual costs. Direct materials purchased and used (1,500 pounds) Direct labor (1,730 hours) Compute the total, price, and quantity variances for materials and labor. Total materials variance Materials price variance Materials quantity variance Total labor variance Labor price variance Labor quantity variance $33.30 $5,850 $18,684Explanation / Answer
Solution:
Standard quantity of material for actual production = 340*9 = 3060 pound
Standard price of material = $3.70
Actual quanity of material = 1500 pound
Actual price of material = $5,850 / 1500 = $3.90
Material price variance = (SP - AP) * AQ = ($3.70 - $3.90) * 1500 = $300 U
Material quantity variance = (SQ - AQ) * SP = (3060 - 1500) * $3.70 = $5,772 F
Total material variance = Material price variance + Material quantity variance
= -$300 + $5,772 = $5,472 F
Standard hours of labor for actual production = 340 * 5 = 1700 hours
Standard rate of direct labor = $11 per hour
Actual hours of labor = 1730 hours
Actual rate of direct labor = $18,684/ 1730 = $10.80 per hour
Labor price variance = (SR - AR) * AH = ($11 - $10.80) * 1730 = $346 F
Labor quantity variance = (SH - AH) * SR = (1700 - 1730) * $11 = $330 U
Total labor variance = Labor price variance + Labor quantity variance = $346 - $330 = $16 F
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