Pasts QualiTech Company produces computer circuits in large batches. Materials e
ID: 2414457 • Letter: P
Question
Pasts QualiTech Company produces computer circuits in large batches. Materials each batch. After forming the materials for a set number changeovers have been established: for the circuits are formed and polished in specialized machines that require continuous maintenance and of circuits, the machines are cleaned and prepared for the next batch of materials to be formed. The followving standards for machine are cleaned and Direct materials (15 litres $1.80) $27.00 Direct labour (02 hr.@ $22.00) Standard prime cost of a changeover $31.40 During the year, 400,000 litres of material were purchased and used for the changeover activity. There were 25,000 batches produced, with the following actual prime costs: Direct materials $740,000 Direct labour 107,500 (for 6,300 hrs.) Total Material Variance is $ Total Material Price Variance is This variance is (F/U) Total Usage Variance is $ 4.40 This variance is (F/U) This variance is (F/U) This variance is (F/U) Total Labour Variance is $T The Labour Rate(price) variance is $ The Labour Efficiency (usage) variance is $ This variance is (F/U This variance is (F/U)Explanation / Answer
Solution:
Part 1 --- Material Variances
Total Materials Variance
Direct material price variance (Refer working below)
$20,000
Unfavorable
Direct Material Quantity Variance (Refer working below)
$45,000
Unfavorable
Total Materials Variance
$65,000
Unfavorable
Direct Material Price Variance
Actual Price ($740,000 / 400,000 litres)
$1.85
Per Litre
Standard Price
$1.80
Per Litre
Variance or Difference in Price
$0.05
Per Litre
x Actual Quantity PURCHASED
400,000
Litre
Material Price Variance
$20,000
Unfavorable
Direct Material Quantity/Efficiency Variance
Standard Quantity Allowed for actual production:
Actual Production/Activity
25000
Batches
x Allowed Standard Quantity Per Unit
15
Litre
Total Standard Quantity Allowed for actual production (SQAP)
375,000
Litre
Actual Quantity USED (AQU)
400,000
Litre
Variance or Difference in Quantity
25,000
Litre
x Standard Price (SP)
$1.80
Per Litre
Material Quantity/Efficiency Variance
$45,000
Unfavorable
Part 2 --- Labor Variances
Total Labor Variance
Direct Labor Rate Variance
$31,100
Favorable
Direct Labor Efficiency Variance
$28,600
Unfavorable
Total Labor Variance
$2,500
Favorable
Labor Rate Variance
Actual Hourly Rate ($107,500 / 6,300 hrs)
$17.06
Per Hour
Standard Hourly Rate
$22.00
Per Hour
Variance or Difference in Rate
$4.94
Per Hour
x Actual Labor Hours worked
6300
Hours
Labor Rate Variance
$31,100
Favorable
Labor Quantity / Efficiency Variance
Standard Hours Allowed for actual production:
Actual Production
25000
Batches
x Allowed Standard Hours Per Unit
0.2
hours
Total Standard Hours Allowed for actual production (SHAP)
5,000
hours
Actual Labor Hours Worked (AH)
6,300
hours
Variance or Difference in Hours
1,300
hours
x Standard Hourly Rate (SHR)
$22.00
per hour
Labor Efficiency Variance
$28,600
Unfavorable
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Total Materials Variance
Direct material price variance (Refer working below)
$20,000
Unfavorable
Direct Material Quantity Variance (Refer working below)
$45,000
Unfavorable
Total Materials Variance
$65,000
Unfavorable
Direct Material Price Variance
Actual Price ($740,000 / 400,000 litres)
$1.85
Per Litre
Standard Price
$1.80
Per Litre
Variance or Difference in Price
$0.05
Per Litre
x Actual Quantity PURCHASED
400,000
Litre
Material Price Variance
$20,000
Unfavorable
Direct Material Quantity/Efficiency Variance
Standard Quantity Allowed for actual production:
Actual Production/Activity
25000
Batches
x Allowed Standard Quantity Per Unit
15
Litre
Total Standard Quantity Allowed for actual production (SQAP)
375,000
Litre
Actual Quantity USED (AQU)
400,000
Litre
Variance or Difference in Quantity
25,000
Litre
x Standard Price (SP)
$1.80
Per Litre
Material Quantity/Efficiency Variance
$45,000
Unfavorable