Question

Community Manufacturing Inc. developed the following standard costs for direct material and direct labor for one of their major products, the 30-gallon heavy-duty plastic container.

Standard Quantity Standard Price
Direct Materials 0.20 pounds $26 per pounds
Direct labor 0.10 hours $14 per hour
During May, Community produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050
direct labor hours at an average wage of $14.75 per hour.
1. May's direct material price variance was:
2. May's direct material quantity variance was:
3. May's direct labor cost variance was:
4. May's direct labor rate variance was:
5. May's direct labor efficiency variance was:

Answer 1

Particulars Standard Actual

Qty Rate Amount Qty Rate Amount

Materials 2,000 26 52,000 2,200 24 52,800

Labor 1,000 14 14,000 1,050 14.75 15,487.50

Actual output 10,000.00

Materials required (10000*0.20) = 2,000.00

Labor hrs required (10000*0.1) = 1,000.00

1. May's direct material price variance

= (SP-AP)*AQ

= (26 - 24*)2200

= 4,400 F

2. May's direct material quantity variance

= (SQ-AQ)*SP

= (2,000 - 2,200)*26

= 5,200 U

3. May's direct labor cost variance

= Standard Cost - Actual Cost

= 14,000 - 15,487.50

= 1,487.50 U

4. May's direct labor rate variance

= (SR-AR)*AH

= (14 - 14.75)*1,050

= 787.50 U

5. May's direct labor efficiency variance

= (SH-AH)*SR

= (1,000 - 1,050)*14

= 700 U