Part 1 Billy Bats, Inc. manufactures aluminum baseball bats that it sells to uni
ID: 2523692 • Letter: P
Question
Part 1
Billy Bats, Inc. manufactures aluminum baseball bats that it sells to university athletic departments. It has developed the following per unit standard costs for 2018 for each baseball bat:
Direct Materials Direct Labor
Standard quantity 2 pounds (Aluminum) ½ hour
Standard price $4.00 $10.00
Unit standard cost $8.00 $5.00
In 2018, the company planned to produce 80,000 baseball bats at a level of 40,000 hours of direct labor. Actual results for 2018 are presented below:
1. Direct materials purchased were 164,000 pounds of aluminum that cost $688,800.
2. Direct materials used were 146,000 pounds of aluminum.
3. Direct labor costs were $374,400 for 39,000 direct labor hours actually worked.
4. Actual production was 76,000 baseball bats.
Instructions
Compute the following variances:
1. Direct materials price.
2. Direct materials quantity.
3. Direct labor price.
4. Direct labor quantity.
Explanation / Answer
Solution- 1: $31,200 Unfavorable
It is calculated using the formulae as: (Actual Price-Std Price)*Qty Purchased
Direct Material Price Variance
= Actual Price * Quantity Purchased – Standard Price * Quantity Purchased
= $688,800 – 4*164,400 = $31,200 Unfavorable
Solution-2: 24,000 Favorable
Direct Material Quantity Variance:
= (Actual Quantity used- Standard Quantity used)*Standard rate
= (146,000 – 76,000*2) * 4
= 24,000 Favorable
Solution-3: $15,600 favorable
Labor rate variance is calculated using the formulae as
= (Actual Rate- Std Rate)*Actual Labor hour
= Actual rate * Actual labor Hours – Standard Rate * Actual Labor hours
= 374,400 – 10* 39,000
= 15,600 favorable
Solution- 4: $10,000 Unfavorable
Direct Labor Quantity variance = (Actual hours used- Standard hours used)*Standard rate
= (39,000 – 76,000*1/2) * $10
= $10,000 Unfavorable