Fundamental Accounting Principles
Fundamental Accounting Principles
23rd Edition
ISBN: 9781259536359
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 23, Problem 11E
To determine

Direct Material Price Variance:

The variance which is caused by the difference between the actual price per unit incurred and the expected price per unit to be incurred on the direct material is called the direct material price variance.

Direct Material Quantity Variance:

At the standard price, the difference between the actual quantity and standard quantity is termed as direct material quantity variance. The quantity variance measures the efficiency of management in utilizing the direct material for the production.

Direct Labor Rate Variance:

The difference between the actual rate per direct labor hour and standard rate per direct labor hours at the actual labor hour is called the direct labor rate variance. It measures the variance due the changes in the rate of direct labor hour.

Direct Labor Efficiency Variance:

The variance which is caused by the difference between the actual labor hours and standard labor hours allowed per unit is called the direct labor efficiency variance. It is computed by deducting the standard cost of direct labor from the standard cost at actual direct labor hour.

To determine:

1. Computation of direct material price and quantity variances

2. Computation of direct labor rate and efficiency variances

Indicate the variances as favorable and unfavorable

Expert Solution & Answer
Check Mark

Answer to Problem 11E

Solution:

1. Huto Corporation has favorable variance of $34,500 in direct material price and unfavorable variance of $12,000 in direct material quantity.

2. The company has unfavorable variance in both direct labor rate and efficiency with $3,100 and $60,000 respectively.

Explanation of Solution

Explanation:

1. Direct material price and quantity variance

Direct Material Price Variance = Actual Quantity X (Actual Price  Standard Price)                                                 = 138,000 lbs. X ($3.75  $4.00)                                                 = 138,000 lbs. X $0.25                                                 = $34,500 FavorableDirect Material Quantity Variance = Standard Price X (Actual Quantity  Standard Quantity)                                                       = $4.00 X (138,000 lbs.  135,000 lbs.)                                                       = $12,000 Unfavorable*Standard Quantity = Direct material allowed per unit X Actual level of production                                = 15 lbs. X 9,000 units                                 = 135,000 lbs.

2. Direct labor rate and efficiency variance

Direct Labor Rate Variance = Actual Hours X (Actual Rate  Standard Rate)= 31,000 hours X ($15.10  $15.00)= 31,000 hours X $0.10= $3,100Unfavorable Direct Labor Efficiency Variance = Standard Rate X (Actual Hours  Standard Hours)= $15.00 X (31,000 hours  27,000 hours)= $15.00 X 4,000 hours= $60,000Unfavorable *Standard Hours = Direct labor hours allowed per unit X Actual level of production= 3 hours X 9,000 units= 27,000 hours

Conclusion

Conclusion:

The direct material price variance is favorable and the quantity variance is unfavorable.

The both direct labor rate and efficiency variance are unfavorable .

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Chapter 23 Solutions

Fundamental Accounting Principles

Ch. 23 - Prob. 11DQCh. 23 - Prob. 12DQCh. 23 - Prob. 13DQCh. 23 - How can the manager of advertising sales at Google...Ch. 23 - Prob. 15DQCh. 23 - Prob. 16DQCh. 23 - Prob. 17DQCh. 23 - Prob. 18DQCh. 23 - Prob. 1QSCh. 23 - Prob. 2QSCh. 23 - Prob. 3QSCh. 23 - Prob. 4QSCh. 23 - Prob. 5QSCh. 23 - Prob. 6QSCh. 23 - Prob. 7QSCh. 23 - Prob. 8QSCh. 23 - Prob. 9QSCh. 23 - Prob. 10QSCh. 23 - Prob. 11QSCh. 23 - QS 23-12 Labor cost variances P2 Frontera...Ch. 23 - Prob. 13QSCh. 23 - Prob. 14QSCh. 23 - Volume variance P3 Refer to information in QS...Ch. 23 - Prob. 16QSCh. 23 - Preparing overhead entries P5 Refer to the...Ch. 23 - Prob. 18QSCh. 23 - Prob. 19QSCh. 23 - Prob. 20QSCh. 23 - Prob. 21QSCh. 23 - Prob. 22QSCh. 23 - Prob. 23QSCh. 23 - Prob. 1ECh. 23 - Prob. 2ECh. 23 - Prob. 3ECh. 23 - Exercise 23-4 Preparing a flexible budget...Ch. 23 - Prob. 5ECh. 23 - Prob. 6ECh. 23 - Exercise 23-7 Cost variances C2 Presented below...Ch. 23 - Prob. 8ECh. 23 - Prob. 9ECh. 23 - Prob. 10ECh. 23 - Prob. 11ECh. 23 - Prob. 12ECh. 23 - Prob. 13ECh. 23 - Prob. 14ECh. 23 - Prob. 15ECh. 23 - Prob. 16ECh. 23 - Prob. 17ECh. 23 - Exercise 23-18A Computation and interpretation...Ch. 23 - Prob. 19ECh. 23 - Prob. 20ECh. 23 - Prob. 21ECh. 23 - Prob. 22ECh. 23 - Prob. 23ECh. 23 - Prob. 1APSACh. 23 - Prob. 2APSACh. 23 - Prob. 3APSACh. 23 - Prob. 4APSACh. 23 - Prob. 5APSACh. 23 - Prob. 6APSACh. 23 - Prob. 1BPSBCh. 23 - Prob. 2BPSBCh. 23 - Problem 23-3B Flexible budget preparation;...Ch. 23 - Prob. 4BPSBCh. 23 - Prob. 5BPSBCh. 23 - Prob. 6BPSBCh. 23 - Prob. 23SPCh. 23 - Analysis of flexible budgets and standard costs...Ch. 23 - Prob. 2BTNCh. 23 - Selling materials, labor, and overhead standards...Ch. 23 - Prob. 4BTNCh. 23 - Prob. 5BTNCh. 23 - Prob. 6BTNCh. 23 - Prob. 7BTNCh. 23 - Prob. 8BTNCh. 23 - BIN 23-9 Access the annual report of Samsung (at...
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY