Part of your company\'s accounting database was destroyed when Godzilla attacked

Question

Part of your company's accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information using the available data. All of the raw material purchased during the period was used in production. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round "Standard Quantity per Unit of Output for Direct Material" to 2 decimal places.) Direct Labor Direct Material Standard price or rate per unit of input Standard quantity per unit of output Actual quantity used per unit of output Actual price or rate per unit of input Actual output Direct-material price variance Direct-material quantity variance Total direct-material variance Direct-labor rate variance Direct-labor efficiency variance Total direct-labor variance 20 per hour 8 per lb hours per unit Ibs per unit Ibs per unit 3.5 hours 7 per lb 10,000 units 21 per hour 10,000 units $ 30,000 F (20,000) $ 10,000 F 35,000 U $ 100,000 F 65,000 F

Explanation / Answer

1. Direct Material Price Variance (Standard Price - Actual Price) * Actual Quantity 30000 =    ( 8 - 7)* Actual Quantity 30000   = 1 * Actual Quantity Actual Quantity = 30000 Actual Units produced = 10000 units Hence, Actual Quantity Used per unit of output = 30000/10000 Actula Quantity used per unit of output = 3lbs per unit 2. Direct Material Quantity Variance ( Standard Quantity - Actual Quantity) * Standard Price                     (20,000) = ( Standard quantity - 30000)* 8 -2500 = Standard Quantity - 30000 Standard Quantity = 27500 Standard Quantity used per unit of Output = 27500/10000 Standard Quantity used per unit of output =    2.75 lbs per unit 3. Direct Labour Efficiency variance (Standard Hour - Actual Hour) * Standard Direct labour rate 10000   = ( Standard Hour   -   35000) * 20 500 = Standard Hour - 35000 Standard Hour = 35500 Standard Hour per unit of Output   = 35500/10000 Standard Hour per unit of Output = 3.55 hours

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