Sawyer Industries, Inc. (SII), developed standard costs for direct material and
ID: 2466166 • Letter: S
Question
Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75 per hour.
1) July's direct material flexible-budget variance is: A) $1,400 unfavorable B) $21,100 favorable C) $2,500 unfavorable D) None of these answers are correct.
2) July's direct material price variance is: A) $1,400 favorable B) $1,100 favorable C) $2,500 unfavorable D) None of these answers are correct.
3) July's direct material efficiency variance is: A) $1,400 unfavorable B) $1,100 favorable C) $2,500 unfavorable D) None of these answers are correct.
4) July's direct manufacturing labor flexible-budget variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 unfavorable D) None of these answers are correct.
5) July's direct manufacturing labor price variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 favorable D) None of these answers are correct.
6) July's direct manufacturing labor efficiency variance is: A) $375.00 unfavorable B) $131.25 favorable C) $243.75 favorable D) None of these answers are correct.
Explanation / Answer
Actual Production= 5000 Unit
Actual Labour Hrs. =525 Hrs.
Actual Material =1100 pounds
1- A) $1,400 unfavorable
Material Flexible Varriance =(SQ*SP)- (AQ*AP)
= (1000*25)- (1100*24) = -$1400
2- B) $1,100 favorable
Material Price Varriance= (SP-AP)*AQ
= (25-24)*1100 =$1100
3 - C) $2,500 unfavorable
Material EFFICIENCY Varriance= (SQ-AQ)*SP
= (1000-1100)*25 = -2500
4- C) $243.75 unfavorable
Direct manufacturing labor flexible-budget variance = Standard Cost- Actual Cost
= (.10*5000*15) -(525*14.75) = -$243.75
5- B) $131.25 favorable
Labour Rate Varriance= (SR-AR)*AHrs.
= (15-14.75)*525= $131.25
6-C) $243.75 favorable
Labour Efficiency Varriance= (SH*SR)- (AH*SR)
= 7500-7743.75 = -$243.75
Standard Actual Direct Material 0.20 Pound 0.22 Material Price $25.00 $24.00 Direct Labour 0.10 Hrs. 0.105 D. Labour Rate $15.00 14.75