Please use the following information for a company that makes and sell clocks fo
ID: 2535758 • Letter: P
Question
Please use the following information for a company that makes and sell clocks for problems 2 and 3 below::
Actual number of clocks to be produced and sold 2,000
Standard quantity of 3 pounds of material per unit
Standard price of $5 per pound
Standard quantity of 2 hours of direct labor per unit
Standard rate of $10 per direct labor hour
Actual results:
Direct materials cost 3.5 pounds of material per unit costing $4 per pound
Direct labor cost 1.5 hours of direct labor per unit costing $16 per direct labor hour
2. Please calculate the direct materials price and quantity variances
3. Please calculate the direct labor rate and efficiency variances
Explanation / Answer
Direct Material Standard Price (SP) $5.00 Standard Quantity (SQ) (3*2000) 6,000 Actual Quantity (AQ) (3.5*2000) 7,000 Actual price (AP) $4.00 Material Price Variance: AQ X SP Minus AQ X AP 7,000 X $5.00 Minus 7,000 X $4.00 35,000 Minus 28,000 7,000 Favourable Material Quantity Variance: SQ X SP Minus AQ X SP 6,000 X $5.00 Minus 7,000 X $5.00 30,000 Minus 35,000 (5,000) Unfavourable Direct Labour Standard Rate (SR) $10.00 Standard Hours (SH) (2 *2,000) 4,000 Actual Hours (AH) (1.5 *2,000) 3,000 Actual Rate (AR) $16.00 Labour Rate Variance: AH X SR Minus AH X AR 3,000 X $10.00 Minus 3,000 X 16.00 30,000 Minus 48,000 (18,000) Unfavourable Labour Efficiency Variance: SH X SR Minus AH X SR 4,000 X $10.00 Minus 3,000 X $10.00 40,000 Minus 30,000 10,000 Favourable