(SO 2, 3) Calculate direct materials and direct labour variances. E12-31 Jay Lev

Question

(SO 2, 3) Calculate direct materials and direct labour variances. E12-31 Jay Levitt Company budgeted the following cost standards for the current year Direct materials (2 kg of plastic at $5 per kilogram) Direct labour (2 hours at $12 per hour) Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit $10.00 24.00 12.00 6.00 Actual costs for producing 2,750 units were as follows: Direct materials used Direct materials purchased (6,500 kg) Direct labour (6,875 hours) Variable manufacturing costs Fixed manufacturing costs 6,050 kg $31,200 $68,750 S33,000 $18,000 Instructions (a) Calculate the material price variance for materials purchased. (b) Calculate the material efficiency variance. (c) Calculate the labour price variance (d) Calculate the labour efficiency variance.

Explanation / Answer

a Material price variance = 31200-(6500*5)= 1300 Favorable b Material efficiency variance = 5*(6500-2750*2)= 5000 Unfavorable c Labour price variance =68750-(6875*12)= 13750 Favorable d Labour efficiency variance = 12*(6875-2750*2)= 16500 Unfavorable

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