E Company has developed the following standards for one of its products: Direct

ID: 2562391 • Letter: E

Question

E Company has developed the following standards for one of its products:

Direct materials 20 pounds × $4 per pound

Direct labor 5 hours × $18 per hour

Variable overhead 5 hours × $4 per hour

The following activities occurred during the month of October:

Materials purchased 230,000 pounds at $4.20 per pound

Materials used 220,000 pounds

Units produced 10,000 units

Direct labor 51,000 hours at $17.70 per hour

Actual variable overhead $240,000

The company records materials price variances at the time of purchase.

a) E’s materials price variance would be

b) E’s materials quantity variance would be

c) E’s labor price variance would be

d)E’s labor quantity variance would be

a) Material price variance = (standard price-actual price)actual quantity purchase

= (4-4.20)230000

Material price variance = 46000 Unfavourable

b) Material quantity variance = (standard quantity-actual quantity)standard price

= (10000*20-220000)4

material quantity variance = 80000 Unfavourable

c) Labour price variance = (standard rate-actual rate)actual hours

= (18-17.70)51000

Labour price variance = 15300 Favourable

d) Labour quantity variance = (standard hours-actual hours)standard rate

= (10000*5-51000)18

Labour quantity variance = 18000 unfavourable

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