Concept explainers
Direct materials and direct labor variance analysis
Faucet Industries Inc. manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Faucet Industries has 60 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:
Instructions
Determine (a) the
(a)
Concept Introduction:
Standard cost is an accounting system which is used by manufacturers to know the difference between actual cost and standard cost of product.
To Compute:
The standard cost per unit for direct material and direct labor.
Answer to Problem 13.4P
The standard cost per unit for direct material is
Explanation of Solution
Details of material and labour are given in following table:
Materials and Labours | ||||||
Particulars | Standard Quantity | Standard Price(per unit) | Standard Cost | Actual Quantity | Actual Price(Per unit) | Actual cost |
Material (lbs) | | | | | | |
Labour (hrs) | | | | | | |
Now, the calculation of standard cost per unit of direct material and direct labour:
Particulars | Amount ($)( | Amount per Faucet |
Material | | |
Labour | | |
| |
(b)
Concept Introduction:
Standard cost is an accounting system which is used by manufacturers to know the difference between actual cost and standard cost of product.
To Compute:
The price variance, quantity variance and cost variance direct material.
Answer to Problem 13.4P
The direct material price variance is
The direct material quantity variance is
The direct material cost variance is
Explanation of Solution
Computation of direct material price variance is as follows:
Direct material price variance is adverse as the actual price is more than standard price.
Computation of Direct material quantity variance is as follows:
Direct material quantity variance is adverse as the actual quantity is more than standard quantity.
Computation of Direct material cost variance is as follows:
The direct material cost variance is also adverse.
(c)
Concept Introduction:
Standard cost is an accounting system which is used by manufacturers to know the difference between actual cost and standard cost of product.
To Compute:
The rate variance, time variance and cost variance of direct labour.
Answer to Problem 13.4P
The direct labourrate variance is
The direct labour time variance is
The direct labour cost variance is
Explanation of Solution
Computation of direct labour rate variance is as follows:
Direct labour rate variance is adverse as the actual rate per hour is more than standard rate per hour.
Computation of Direct labor time variance is as follows:
Direct labour time variance is Favorable as the actual direct labour hours is less than standard direct labour hours.
Computation of Direct labour cost variance is as follows:
The direct labour cost variance is also Favorable.
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Chapter 13 Solutions
Survey of Accounting (Accounting I)
- Direct materials, direct labor, and factory overhead cost variance analysis Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 40,000 units of product were as follows: Each unit requires 0.3 hour of direct labor. Instructions Determine (A) the direct materials price variance, direct materials quantity variance, and total direct materials cost variance; (B) the direct labor rate variance, direct labor time variance, and total direct labor cost variance; and (C) the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance.arrow_forwardStandard cost summary; materials and labor cost variances Perkins Processors Inc. produces an average of 10,000 units each month. The factory standards are 20,000 hours of direct labor and 10,000 pounds of materials for this volume. The standard cost of direct labor is 9.00 per hour, and the standard cost of materials is 4.00 per pound. The standard factory overhead at this level of production is 20,000. During the current month the production and cost reports reflected the following information: On the basis of this information: 1. Prepare a standard cost summary. 2. Calculate the materials (use the materials purchase price variance) and labor cost variances, and indicate whether they are favorable or unfavorable, using the formulas on pages 421422 and 424.arrow_forwardCalculation of materials and labor variances Fritz Corp. manufactures and sells a single product. The company uses a standard cost system. The standard cost per unit of product follows: The charges to the manufacturing department for November, when 5,000 units were produced, follow: The Purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 lb were purchased at a price of $2.90 per pound. Required: Calculate the following from standard costs for the data given, using the formulas on pages 421–422 and 424: Materials quantity variance. Materials purchase price variance (at time of purchase). Labor efficiency variance. Labor rate variance. Give some reasons as to why both the materials quantity variance and labor efficiency variance might be unfavorable.arrow_forward
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