XYZ Corp. uses a standard cost system and has established the following standard
ID: 2579099 • Letter: X
Question
XYZ Corp. uses a standard cost system and has established the following standard quantity Standard price direct materials 10 pounds $2.60/pound Direct labor .25 hour $10 per poundStandard cost $26 + 2.50 = 28.50
During November , the company purchased 240,000 pounds of material at a total cost of $ 588,000. The total factory wages for October were 49,000. During November, 21,000 units of product were manufactured using 211,000 pounds of material and 5,200 direct labor hours. Material quantity and price variances are recorded when materials are used.
A. Compute the material quantity and labor efficiency variances B. Compute the material price and labor rate variances
XYZ Corp. uses a standard cost system and has established the following standard quantity Standard price direct materials 10 pounds $2.60/pound Direct labor .25 hour $10 per pound
Standard cost $26 + 2.50 = 28.50
During November , the company purchased 240,000 pounds of material at a total cost of $ 588,000. The total factory wages for October were 49,000. During November, 21,000 units of product were manufactured using 211,000 pounds of material and 5,200 direct labor hours. Material quantity and price variances are recorded when materials are used.
A. Compute the material quantity and labor efficiency variances B. Compute the material price and labor rate variances
standard quantity Standard price direct materials 10 pounds $2.60/pound Direct labor .25 hour $10 per pound
Standard cost $26 + 2.50 = 28.50
During November , the company purchased 240,000 pounds of material at a total cost of $ 588,000. The total factory wages for October were 49,000. During November, 21,000 units of product were manufactured using 211,000 pounds of material and 5,200 direct labor hours. Material quantity and price variances are recorded when materials are used.
A. Compute the material quantity and labor efficiency variances B. Compute the material price and labor rate variances
Explanation / Answer
A Material Quantity Variance (Standard Quantity for Actual Output - Actual Quantity) X Standard Price = [(21000 x 10) - 211,000] X 2.60 = 2,600 Unfavourable Labour Efficieny Variance (Standard Hours for Actual Output - Actual Hours worked ) X Standard rate = [(21000 x 0.25) - 5200] X 10 = 500 Favourable B Material Price Variance (Standard Price - Actual Price) X Actual Quantity Consumed = [2.60 - (588,000/240,000)] X 211000 pounds = 31,650 Favourable Labour Rate Variance (Standard rate - Actual rate) X Actual Hours = [10 - (49000/5200)] X 5200 hours = 3,288.46 Favourable Assumed that Standard price for direct labor is considered as rate per hour Factory wages given as October is considered
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