Accounting Chapter 10 Homework Direct material Purchase Price Variance

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DATA INPUT

Control valves manufactured in March: 15,600 units

Actual costs:

Direct labor 80,200 hr. at 10.95$

Direct material purchased 50,000 lb. at 5.20$

Direct material used 46,200 lb.

Standard prime costs:

Direct material 3 lbs. at 5.00$ per lb 15.00$

Direct labor 5 hrs. at 11.25$ per hr. 56.25

Standard prime cost per unit 71.25$

SOLUTION

1. Schedule of standard production costs, based on actual production of 15,600 units:

Standard

Costs

Direct material 15,600 units x 3 lbs x 5.00$ = 234,000$

2. Variances:

a) Direct-material price variance = (AQ x AP) – (AQ x SP)

= 46,200 x 5.20$ – 46,200 x 5.00$

b) Direct-material quantity variance =(AQ x SP) – (SQ* x SP)

= 46,200 x 5.00$ – 46,800 x 5.00$

c) Direct-material purchase price variance = (PQ x AP) – (PQ x SP)

= 50,000 x 5.20$ – 50,000 x 5.00$

d) Direct-labor rate variance = (AH x AR) – (AH x SR)

= 80,200 x 10.95$ – 80,200 x 11.25$

e) Direct-labor efficiency variance = (AH x SR) – (SH* x SR)

= 80,200 x 11.25$ – 78,000 x 11.25$

For the Month of March

Valport Valve Company

Shreveport Plant

Schedule of Standard Production Costs

Based on 15,600 Units