Prepare formulas to calculate the Direct Material Price Variance, Direct Materia
ID: 2497021 • Letter: P
Question
Prepare formulas to calculate the Direct Material Price Variance, Direct Material Quantity Variance, Direct Labor Rate Variance, and Direct Labor 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
Use the data given.
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
Direct Material price variance = (Actual price - Standard price) x Actual qty
Direct Material Quantity variance = (Actual Quantity - Standard Quantity) x Standard price
Direct Labor rate variance = (Actual rate - Standard rate) x Actual hours
Direct Labor Efficiency variance = (Actual Hours - Standard Hours) x Standard rate
Material Measurement Std Qty Std cost per unit Std qty for actual output of 1000 Actual Price Actual quantity in production Material Price variance Price variance remarks Material Quantity variance Price Quantity remarks M- A Yard 5.00 22.00 5,000 21.50 4,900 (2,450.00) Favorable (2,200.00) Favorable M- B Gallon 2.50 18.00 2,500 18.75 3,050 2,287.50 Unfavorable 9,900.00 Unfavorable M- C Pound 10.00 5.00 10,000 6.00 11,000 11,000.00 Unfavorable 5,000.00 Unfavorable M- D Piece 15.00 30.00 15,000 29.00 15,250 (15,250.00) Favorable 7,500.00 Unfavorable