Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 p

Question

Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 pillowcases, using 27,200 yards of fabric costing $3.05 per yard and incurring direct labor costs of $17,820 for 3,300 hours of direct labor. The standard cost per pillowcase assumes 1.75 yards of fabric at $3.10 per yard, and 0.20 hours of direct labor at $5.95 per hour. a. Compute both the price variance and quantity variance relating to direct materials used in the manufacture of pillowcases in May b. Compute both the rate variance and efficiency variance for direct labor costs incurred in manufacturing pillowcases in May. (For all requirements, Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance). Round your answers to 2 decimal places.) a. Materials price variance Materials quantity variance b. Labor rate variance Labor efficiency variance

Explanation / Answer

Material Price variance = (Standard price-actual price ) actual quantity

= (3.10-3.05)*27200

Material price variance = 1360 Favourable

Material usage variance = (Standard quantity-actual quantity)Standard price

= (15000*1.75-27200)3.10

Material usage variance = 2945 Unfavourable

Labour rate variance = (Standard rate-actual rate ) actual hours

= (5.95*3300-17820)

Labour rate variance = 1815 Favourable

Labour efficiency variance = (Standard hours-actual hours)Standard rate

= (15000*.20-3300)5.95

Labour efficiency variance = 1785 Unfavourable

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