Use the following information to answer the next three questions Bill’s Furnitur
ID: 2475182 • Letter: U
Question
Use the following information to answer the next three questions
Bill’s Furniture Corporation produces furniture, it expects that the cost of direct materials per unit will amount to $31.50. Bill’s Furniture Corporation expected to produce 2,200 pieces of furniture last month; however, actual production totaled 2,450 pieces of furniture. The actual cost of direct materials per unit amounted to $42.00
1. What is the master (static) budget variance for direct materials? Indicate whether the variance is favorable or unfavorable.
2. What is the flexible budget (spending) variance for direct materials? Indicate whether the variance is favorable or unfavorable.
3. What is the sales volume (activity) variance for direct materials? Indicate whether the variance is favorable or unfavorable.
Use the following information to answer the next four questions
For each unit produced, a company expects to use 4 pounds of material at a cost of $2.25 per pound. It also expects each unit to require 2 hours of direct labor to complete, and it expects the wage rate to be $15 per hour. During the month, the company purchased 40,000 pounds of material for $94,000, and used all 40,000 pounds of material to produce 8,000 units. The company actually incurred direct labor costs amounting to $250,800 for the 17,600 direct labor hours actually worked during the month.
4. What is the company’s direct materials price variance? Indicate whether the variance is favorable or unfavorable.
5. What is the company’s direct materials quantity variance? Indicate whether the variance is favorable or unfavorable.
6. What is the company’s direct labor rate variance? Indicate whether the variance is favorable or unfavorable.
7. What is the company’s direct labor efficiency variance? Indicate whether the variance is favorable or unfavorable.
Explanation / Answer
Bills Furniture Details Budget Variance Static Budget Flexible Budget Actual Result Units Produced 2,200.00 2,450.00 2,450.00 Unit Cost of Direct Material 31.50 31.50 42.00 Total Direct Material Cost Of Furniture 69,300.0 77,175.0 102,900.0 Direct Material Budget Variance: 1 Static Budget Variance =Static Budget -Actual results= 33,600.00 Unfavorable 2 Flexible budget (spending )variance= Flexible Budget-Actual Results= 25,725.00 Unfavorable 3 Sales Volume (activity ) variance=Static Budget-Flexible budget= 7,875.00 Unfavorable Std Cost Qty/Hr Rate Cost Direct Material 4.00 2.25 9.00 Direct Labor 2.00 15.00 30.00 Actual results Actual Qty /Hrs Rate Actual cost Std Qty /Hr for 8000 units Direct Material 40,000 2.35 94,000 32,000 Direct Labor 17,600 14.25 250,800 16,000 4 Direct Materials Price Variance= Actual Qty Used( Actual Rate-Std Rate) =40000*(2.35-2.25) 4,000 (U) 5 Direct Material Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output) =2.25*(40000-32000) 18,000 (U) 6 Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =17600*(14.25-15) 13,200 (F) 7 Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output) =15*(17600-16000) 24,000 (U)