Topaz Company makes one product and has set the following standards for material
ID: 2473559 • Letter: T
Question
Topaz Company makes one product and has set the following standards for materials and labor:
Direct Materials Direct Labor
Standard quantity or hours per unit ? pounds 2.60 hours
Standard price or rate ? per pound $5.00 per hour
Standard cost per unit ? $13.00
During the past month, the company purchased 7,900 pounds of direct materials at a cost of $17,380. All of this material was used in the production of 1,500 units of product. Direct labor cost totaled $18,700 for the month. The following variances have been computed:
Materials quantity variance $1,040 U
Total materials spending variance $2,120 F
Labor efficiency variance $2,500 F
a. Compute the standard price per pound for materials.
b. Compute the standard quantity allowed for materials for the month’s production.
c. Compute the standard quantity of materials allowed per unit of product.
a. Compute the actual direct labor cost per hour for the month.
b. Compute the labor rate variance.
Here's my work for 1a: (17,380+2120)/7900 = 2.47 per pound. This isn't correct; what am I doing wrong?
Topaz Company makes one product and has set the following standards for materials and labor:
Direct Materials Direct Labor
Standard quantity or hours per unit ? pounds 2.60 hours
Standard price or rate ? per pound $5.00 per hour
Standard cost per unit ? $13.00
During the past month, the company purchased 7,900 pounds of direct materials at a cost of $17,380. All of this material was used in the production of 1,500 units of product. Direct labor cost totaled $18,700 for the month. The following variances have been computed:
Materials quantity variance $1,040 U
Total materials spending variance $2,120 F
Labor efficiency variance $2,500 F
a. Compute the standard price per pound for materials.
b. Compute the standard quantity allowed for materials for the month’s production.
c. Compute the standard quantity of materials allowed per unit of product.
2. For direct labor:a. Compute the actual direct labor cost per hour for the month.
b. Compute the labor rate variance.
Here's my work for 1a: (17,380+2120)/7900 = 2.47 per pound. This isn't correct; what am I doing wrong?
Explanation / Answer
Standard (per unit product)
Standard (1500 units)
Actual (1500 units)
Units
Rate
Total cost
Units
Rate
Total cost
Units
Rate
Total cost
Material
4.99
2.47
12.32
7,478.95
2.47
18,473.01
7,900.00
2.20
17,380.00
Labour
2.60
5.00
13.00
3,900.00
5.00
19,500.00
3,400.00
5.50
18,700.00
Total material spending variance = (Actual price-standard price)*Actual quantity
-2120 = (2.2-standard price)*7900
- Standard price =- (2120/7900)-2.2
Standard price = 2.47
Material quantity variance = (actual quantity-standard quantity)*standard rate
1040 = (7900-standard quantity)*2.47
-standard quantity =(1040/2.47)-7900
Standard quantity = 7478.95
Labour efficiency variance = (Actual hours - Standard hours) x Standard rate
-2500= (Actual hours -3900)*5
Actual hours = (-2500/5)+3900
Actual hours = 3400
Standard (per unit product)
Standard (1500 units)
Actual (1500 units)
Units
Rate
Total cost
Units
Rate
Total cost
Units
Rate
Total cost
Material
4.99
2.47
12.32
7,478.95
2.47
18,473.01
7,900.00
2.20
17,380.00
Labour
2.60
5.00
13.00
3,900.00
5.00
19,500.00
3,400.00
5.50
18,700.00