E23-7 Compute materials and labor variances Levine Inc. which produces a single

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E23-7 Compute materials and labor variances Levine Inc. which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $2.50 per pound) $20 Direct labor (3 hours at $12 per hour) $36 During the month of April, the company manufactures 230 units and incurs the following actual costs. Direct materials purchased and used (1,900 pounds) $5,035 Direct labor (700 hours) $8,120 Instructions Compute the total, price, and quantity variances for materials and labor. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a) Total Materials Variance: ( AQ X AP ) minus ( SQ X SP) ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Materials price variance: ( AQ X AP ) minus ( AQ X SP ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Materials quantity variance: ( AQ X SP ) minus ( SQ X SP ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value (b) Total Labor Variance: ( AH X AR ) minus ( SH X SR ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Labor Price variance: ( AH X AR ) minus ( AH X SR ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Labor quantity variance: ( AH X SR ) minus ( SH X SR ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value E23-7 Compute materials and labor variances Levine Inc. which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $2.50 per pound) $20 Direct labor (3 hours at $12 per hour) $36 During the month of April, the company manufactures 230 units and incurs the following actual costs. Direct materials purchased and used (1,900 pounds) $5,035 Direct labor (700 hours) $8,120 Instructions Compute the total, price, and quantity variances for materials and labor. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a) Total Materials Variance: ( AQ X AP ) minus ( SQ X SP) ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Materials price variance: ( AQ X AP ) minus ( AQ X SP ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Materials quantity variance: ( AQ X SP ) minus ( SQ X SP ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value (b) Total Labor Variance: ( AH X AR ) minus ( SH X SR ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Labor Price variance: ( AH X AR ) minus ( AH X SR ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value Labor quantity variance: ( AH X SR ) minus ( SH X SR ) ( Value X Value ) minus ( Value X Value ) = ? minus ? = Value

Explanation / Answer

Labor variances:

notes:

Standard units of materials for actual production SQ= 8 pounds per unit*230= 1840

Actual price per unit= actual material cost/ actual units= 5035/1900= 2.65

Standard hours= 3 hours per unit*230= 690

Actual rate AH= 8120/700= 11.6

Standard quantity Standard rate Standard cost actual quantity actual rate actual cost SQ SP SC AQ AP AC 1840 2.5 4600 1900 2.65 5035 Total material variance AQ*AP - SQ*SP 5035-4600 435 435 U Material price variance AQ* (SP-AP) 1900*(2.5-2.65) -285 285 U Material usage variance SP* (SQ-AQ) 2.5*(1840-1900) -150 150U

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