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26 January, 17:08

Levine Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $2.50 per pound) $20 Direct labor (3 hours at $12.00 per hour) $36 During the month of April, the company manufactures 230 units and incurs the following actual costs. Direct materials purchased and used (1,900 pounds) $5,035 Direct labor (700 hours) $8,120 Compute the total, price, and quantity variances for materials and labor.

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  1. 26 January, 17:45
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    Instructions are listed below.

    Explanation:

    Giving the following information:

    Standard:

    Direct materials (8 pounds at $2.50 per pound) $20

    Direct labor (3 hours at $12.00 per hour) $36

    Actual:

    The company manufactures 230 units

    Direct materials purchased and used (1,900 pounds) $5,035

    Direct labor (700 hours) $8,120

    Direct material:

    Direct material price variance = (standard price - actual price) * actual quantity

    Direct material price variance = [2.5 - (5,035/1,900) ]*1,900 = $285 unfavorable

    Direct material quantity variance = (standard quantity - actual quantity) * standard price

    Direct material quantity variance = (230*8 - 1,900) * 2.5 = $150 unfavorable

    Total variance = 285 + 150 = $435 unfavorable

    Direct labor:

    Direct labor efficiency variance = (SQ - AQ) * standard rate

    Direct labor efficiency variance = (3*230 - 700) * 12 = $120 unfavorable

    Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

    Direct labor rate variance = (12 - 8,120/700) * 700 = $280 favorable

    Total variance = 280 - 120 = $160 favorable
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