Prepare formulas to calculate the Direct Material Price Variance, Direct Materia
ID: 2497004 • Letter: P
Question
Prepare formulas to calculate the Direct Material Price Variance, Direct Material Quantitiy Variance, Dirct Labor Rate Variance, and Direct Lbaor Efficiency Variance.
Standard Costs
Current Month
Materials
Measurement Unit
Standard Quantity
Standard Cost per unit
Purchases
Average cost of purchases
Used in production
Batches Completed and Transferred out
M-A
Yard
5.0
22.00
6,000
21.5
4,900
1,000
M-B
Gallon
2.5
18.00
2,500
18.75
3,050
M-C
Pound
10.0
5.00
10,500
6
11,000
M-D
Piece
15.0
30.00
16,000
29
15,250
Labor Categories
Standard Hours
Standard Rate per hour
Average rate paid
Actual hours
L-1
8.0
10.00
11.00
7,950
L-2
5.0
12.00
11.50
5,100
L-3
3.0
16.00
18.00
3,075
L-4
1.5
20.00
19.90
1,940
Standard Costs
Current Month
Materials
Measurement Unit
Standard Quantity
Standard Cost per unit
Purchases
Average cost of purchases
Used in production
Batches Completed and Transferred out
M-A
Yard
5.0
22.00
6,000
21.5
4,900
1,000
M-B
Gallon
2.5
18.00
2,500
18.75
3,050
M-C
Pound
10.0
5.00
10,500
6
11,000
M-D
Piece
15.0
30.00
16,000
29
15,250
Labor Categories
Standard Hours
Standard Rate per hour
Average rate paid
Actual hours
L-1
8.0
10.00
11.00
7,950
L-2
5.0
12.00
11.50
5,100
L-3
3.0
16.00
18.00
3,075
L-4
1.5
20.00
19.90
1,940
Explanation / Answer
Following are the formulas to calculate the Direct Material Price Variance, Direct Material Quantitiy Variance, Dirct Labor Rate Variance, and Direct Lbaor Efficiency Variance.
Direct Material Price Variance = Actual quantity * Actual Price - Actual Quantity * Standard Price
Direct material Quantity variance = (Standard quantity * actual Quantity) * Stnadard Price
Direct labor Rate variance = (Actual Qty * actual rate) - (Actual qty * Standard rate)
Direct Labor Efficiency variance = (Actual hours * standard rate) - (standard hours * standard rate)