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150) Photo Corporation makes a product with the following standard costs:
Inputs Standard Quantity or Hours Standard Price or Rate
Direct materials 7.8 kilos $ 1.00 per kilo
Direct labor 0.4 hours $ 18.00 per hour
Variable overhead 0.4 hours $ 3.00 per hour
The company reported the following results concerning this product in August.
Actual output 8,500 units
Raw materials used in production 65,550 kilos
Purchases of raw materials 69,000 kilos
Actual direct labor-hours 3,410 hours
Actual cost of raw materials purchases $ 75,900
Actual direct labor cost $ 66,495
Actual variable overhead cost $ 9,889
The company applies variable overhead on the basis of direct labor-hours. The direct materials
purchases variance is computed when the materials are purchased.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.
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151) Meera Corporation makes a product with the following standard costs:
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Inputs Standard Quantity or Hours Standard Price or Rate
Direct materials 8.1 ounces $ 3.00 per ounce
Direct labor 0.5 hours $ 18.00 per hour
Variable overhead 0.5 hours $ 2.00 per hour
In December the company produced 4,200 units using 34,870 ounces of the direct material and
1,900 direct labor-hours. During the month, the company purchased 39,700 ounces of the direct
material at a total cost of $111,160. The actual direct labor cost for the month was $35,530 and
the actual variable overhead cost was $3,990. The company applies variable overhead on the
basis of direct labor-hours. The direct materials purchases variance is computed when the
materials are purchased.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the direct labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.
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152) Al-Shabad Company produces a single product. The company has set the following
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standards for materials and labor:
Standard quantity or hours per unit Standard price or rate
Direct materials ? pounds per unit $ ? per pound
Direct labor 3.0 hours per unit $ 10 per hour
During the past month, the company purchased 7,000 pounds of direct materials at a cost of
$17,500. All of this material was used in the production of 1,300 units of product. Direct labor
cost totaled $36,750 for the month. The following variances have been computed:
Materials quantity variance $ 1,375 U
Total materials variance $ 375 F
Labor efficiency variance $ 4,000 F
Required:
1. For direct materials:
a. Compute the standard price per pound of materials.
b. Compute the standard quantity allowed for materials for the month’s production.
c. Compute the standard quantity of materials allowed per unit of product.
2. For direct labor:
a. Compute the actual direct labor cost per hour for the month.
b. Compute the labor rate variance.
153) In the new cost management scheme of things, what are some of the disadvantages of the
traditional standard cost system (list at least four)?
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154) Market Manufacturing Inc. has developed the following standards for one of its products.
The materials are not substitutable.
Material 1 5 yards $ 6 / yard $ 30
Material 2 6 pieces $ 5 / piece $ 30
Direct labor 3 hours $ 24 / hour $ 72
Total variable cost per unit $ 132
The records for March showed the following actual results:
Material 1 Purchased 10,000 yards for $58,000
Used 9,500 yards
Material 2 Purchased 15,000 pieces for $78,750
Used 12,100 pieces
Direct labor 5,900 hours for $147,500
Units produced 2,000 units
Required:
(1) Calculate the following variances:
(a) Material purchase price variance for material 1.
(b) Material quantity variance for material 1.
(c) Material purchase price variance for material 2.
(d) Material quantity variance for material 2.
(e) Labor rate variance.
(f) Labor efficiency variance.
(2) Give at least one possible cause for each of the following variances:
(a) material 2 quantity variance.
(b) labor rate variance.
(c) labor efficiency variance.
155) Easton Industries developed the following standards for one of its products:
Material 5 feet $ 15 / foot $ 75
Labor 10 hours $ 15 / hour $ 150
Total variable cost $ 225
Actual results for September were:
Units produced 12,000
Material purchased 40,000 feet for $14.25/foot
Material used 70,000 feet
Direct Labor 119,500 hours at $15.10/hour
Required:
(1) Calculate the following variances:
(a) Material purchase price variance.
(b) Material quantity variance.
(c) Labor rate variance.
(d) Labor efficiency variance.
(2) Why would it be inappropriate to calculate the material price variance at the time the material
is used; might there be a situation when it might be all right to do so?
156) Megham Company manufactures a single product. The following standards have been
developed for it:
Direct Material 6 pounds $ 4 /pound
Direct Labor 2 hours $ 15 /hour
During May, the following actual activities occurred: Material purchased, 12,000 pounds for
$45,600; material used in the production of 2,000 units of product, 13,000 pounds; direct labor,
3,500 hours costing $56,000.
Required:
(1) Compute the following variances:
(a) material quantity variance.
(b) labor rate variance.
(c) labor efficiency variance.
(2) Give one possible explanation for each of the 3 variances computed.