uestion 5 Material and Labor Variance Analysis The following data pertains to th

Question

uestion 5 Material and Labor Variance Analysis The following data pertains to the first week of Grant Company's operations during April: Materials: Actual Purchase Actual Usage Standard Usage 1,750 units at $4 10 per unit 1,600 units at $4.20 per unit 450 hours at $13.00 per hour 1,690 units Direct labor Actual hours Standard hours 460 hours at $12.70 per hour Required Compute the following variance, indicating whether each one is favorable or unfavorable: Material purchase price variance, price usage variance and quantity variance. Labor rate and efficiency variances

Explanation / Answer

1) Material purchase price variance = (Actual price-Standard price)*Actual quantity purchased = = (4.10-4.20)*1750 = $ 175 [F] Material price usage variance = (Actual price-Standard price)*Actual quantity used = = (4.10-4.20)*1690 = $ 169 [F] Material quantity variance = (Actual quantity used-Standard usage)*Standard price = = (1690-1600)*4.20 = $ 378 [U] 2) Labor rate variance = (Actual rate-Standard rate)*Actual hours = (13.00-12.70)*450 = $ 135 [U] Labor efficiency variance = (Actual hours-Standard hours)*Standard rate = (450-460)*12.70 = $ 127 [F]

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