oblem 1. Booker Corporation usesthe foll owing standards for 2012: (2.200 units

Question

oblem 1. Booker Corporation usesthe foll owing standards for 2012: (2.200 units were produced) Direct materials: 13,200 pounds at $3 per pound ($39,600) Direct labor: 6.600 hours at $12 per hour ($79,200) Actual results for 2012 were as follows: 2.200 units of finished goods produced Direct materials used: 12,000 pounds at a total cost of $33,000 ($2.75 per pound) Direct labor incurred: 5,500 hours at a total cost of $68,750 ($12.50 per hour) Calculate the following variances for 2012. Label each variance favorable or unfavorable. a. Direct materials price variance b. Direct materials quantity variance c. Direct labor rate variance d. Direct labor time variance

Explanation / Answer

Direct Material Price Variance:

= Actual Quantity x Actual Price - Actual Quantity x Standard Price

12,000 X $2.75 - 12,000 X $3 = 33,000 - 36,000 =( $3,000) Unfavourable

DM Quantity Variance = ( SQ AQ ) × SP

= 13,200 - 12,000 x $3 = $3,600 favourable

Direct labor rate variance = ( SR AR ) × AH

Where,
   SR is the standard direct labor rate
   AR is the actual direct labor rate
   AH are the actual direct labor hours

= 12 -12.50 x 5,500 hours = ($2,750 ) unfavourable

Direct labor rate variance = Actual Hours x Standard Rate - Standard Hours x Standard Rate

= 5,500 hrs x 12 - 6,600 hrs x 12 = ($13,200) unfavourable

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