Chapter 10, Problem 1AE

1.

To determine

Introduction:

Materials quantity variance: The materials quantity variance refers to the difference between the standard quantity and the actual quantity of material used.

Labor rate variance: The labor rate variance refers to the difference between the actual cost and the standard cost of direct labor.

To compute:

a. The materials quantity variance and explain the reason behind this variation.

b. Labor rate variance and explain the reason behind this variation.

2.

To determine

The labor rate variance is favorable when the actual cost is less than the standard cost of direct labor and the labor rate variance is unfavorable when the actual cost incurred is more than the expected cost of direct labor.

The materials quantity variance is favorable when the actual quantity of materials used is less than the standard or expected quantity and the materials quantity variance is unfavorable when the actual quantity of materials used exceeds the standard or expected quantity.

To compute:

1. Materials quantity variance and materials price variance.
2. Labor efficiency variance and labor rate variance.
3. Variable overhead efficiency variance and variable overhead rate variance.