The following standards have been established for a raw material used to make pr

Question

The following standards have been established for a raw material used to make product I92:

Standard quantity of the material per unit of output..

3 pounds

Standard price of the material.....................................

$4.50 per pound

Standard hours of labor per unit of output

2 hours

Standard rate of the labor per hour

$11 per hour

The following data pertain to a recent month

Standard quantity of the material per unit of output..

3 pounds

Standard price of the material.....................................

$4.50 per pound

Standard hours of labor per unit of output

2 hours

Standard rate of the labor per hour

$11 per hour

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Direct Material Price Variance = Actual Quantity *(Actual Rate - Standard Rate) = 6800*(31620/6800 - 4.50) = 1020 (Unfavorable)

Direct Material Quantity Variance = Standard Rate*(Actual Quantity - Standard Quantity used for Actual Production) = 4.50*(6800 - 2300*3) = 450 (Favorable)

Labor Rate Variance = Actual Hours *(Actual Rate - Standard Rate) = 4500*(49050/4500 - 11) = 450 (Favorable)

Labor Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours) = 11*(4500 - 2300*2) = 1100 (Favorable)

Thanks.

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