Pato Company produces leather sandals. The company employs a standard costing sy
ID: 2510363 • Letter: P
Question
Pato Company produces leather sandals. The company employs a standard costing system and has the following standards in order to produce one pair of sandals: standard quantity standard price direct materials 2 leather strips ?? per strip direct labor 2.5 hours $12 per hour variable overhead 2.5 hours ?? per hour During May, Pato purchased leather strips at a total cost of $124,250 and had direct labor totaling $171,100. During May, Pato used 13,600 leather strips in the production of sandals. Pato had no beginning inventories of any type for May. At May 31, Pato had 600 leather strips remaining in its direct materials inventory. Pato Company reported the following variances for May: Direct material price variance .............. $7,100 favorable Direct labor rate variance .................. $29,500 unfavorable Total direct labor variance ................. $8,900 favorable Variable overhead spending variance ......... $2,440 favorable Variable overhead efficiency variance ....... $34,560 favorable Calculate Pato's direct material quantity variance for May. If the variance is favorable, place a minus sign in front of your answer (i.e., -5000). If the variance is unfavorable, simply enter your answer as a number (i.e., 5000).
Explanation / Answer
Solution:
Total direct labor variance = $8,900 F
Actual direct labor cost = $171,100
Total direct labor cost variance = Standard cost of direct labor - actual cost of direct labor
$8,900 = Standard cost of direct labor - $171,100
Standard cost of direct labor = $180,000
standard rate of direct labor = $12 per hours
Standard hours for actual production = $180,000 / $12 = 15000 hours
Standard hours per unit = 2.50 hours
Actual production units = 15000 / 2.50 = 6000 units
Direct material price variance = $7,100 F
Total purchase quantity of leather strips = leather strips used in may + ending inventory in may
= 13600 + 600 = 14200 leather strips
Actual cost of direct material = $124,250
Actual price of direct material = $124,250 / 14200 = $8.75 per unit
Direct material price variance = (SP - AP) * AQ Purchased
= (SP - $8.75) * 14200 = $7,100
SP = $9.25 per leather strip
Standard quantity for actual production = 6000 * 2 =12000 leather strips
Actual quantity used = 13600 leather strips
Direct material quantity variance = (SQ - AQ) * SP = (12000 - 13600) * $9.25 = $14,800