The following standard costs were developed for one of the products of Rammy Cor
ID: 2508037 • Letter: T
Question
The following standard costs were developed for one of the products of Rammy Corporation: STANDARD COST CARD PER UNIT Materials: 4 feet x $14.25 per foot = $ 57.00 Direct labor: 8 hours x $10 per hour = 80.00 Variable overhead: 8 direct labor hours x $8 per hour = 64.00 Fixed overhead: 8 direct labor hours x $12 per hour = 96.00 Total standard cost per unit $297.00 The following information is available regarding the company's operations for the period: Units produced: 11,000 Materials purchased: 52,000 feet @ $13.95 per foot Materials used: 40,000 feet Direct labor: 84,000 hours costing $840,000 Manufacturing overhead incurred: Variable $756,000 Fixed $1,000,000 Budgeted fixed manufacturing overhead for the period is $960,000, and the standard fixed overhead rate is based on expected capacity of 80,000 direct labor hours. Required: (be sure to show all calculations and label each answer clearly) a. Calculate the materials price variance. b. Calculate the materials usage variance.
Explanation / Answer
Material price variance=(standard price-actual price)*actual Quantity
=(14.25-13.95)*52000
=$15600(favourable)
Material usage variance=(Standard quantity-actual quantity)*Standard price
=(4*11000-52000)*14.25
=$114000(unfavourable)
Total material variance=57*11000-52000*13.95
=$98400(unfavourable)
=Material price variance+Material usage variance