Problem 8-28B Computing variances A fire destroyed most of Ordessa Products Corp
ID: 2522400 • Letter: P
Question
Problem 8-28B Computing variances
A fire destroyed most of Ordessa Products Corporation’s records. Megan Carey, the company’s accountant, is trying to piece together the company’s operating results from salvaged documents. She discovered the following data:
Standard materials quantity per unit
2.5 pounds
Standard materials price
$8 per pound
Standard labor quantity per unit
0.6 hour
Standard labor price
$24 per hour
Actual number of products produced
8,000 units
Materials price variance
$3,168 Favorable
Materials usage variance
$1,600 Favorable
Labor price variance
$3,904 Unfavorable
Labor usage variance
$1,902 Unfavorable
Required
a. Determine the actual amount of materials used.
b. Determine the actual price per pound paid for materials.
c. Determine the actual labor hours used.
d. Determine the actual labor price per hour.
Standard materials quantity per unit
2.5 pounds
Standard materials price
$8 per pound
Standard labor quantity per unit
0.6 hour
Standard labor price
$24 per hour
Actual number of products produced
8,000 units
Materials price variance
$3,168 Favorable
Materials usage variance
$1,600 Favorable
Labor price variance
$3,904 Unfavorable
Labor usage variance
$1,902 Unfavorable
Explanation / Answer
a) Material usage variance = (Standard quantity-actual quantity)Standard price
1600 = (20000*8-8X)
8X = 158400
X(actual amount of material used) = 19800
Material price variance = (Standard price-actual price)Actual quantity
3168 = (8*19800-19800X)
19800X = 155232
X(actual price per pound) = 7.84
Labour usage variance = (Standard hour-actual hour)Standard rate
-1902 = (8000*.6*24-24X)
24X = 117102
X(actual hour) = 4879.25
Labour rate variance = (Standard rate-actual rate)Actual hour
-3904 = (24*4879.25-4879.25X)
4879.25X = 121006
Actual labour price = 24.80