Question

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor.

In 2015, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.
Budgeted quantity Budgeted price
Direct materials 0.30 pounds $20 per pound
Direct labor 0.20 hours $12 per hour
During July, GII produced and sold 3, 000 containers using 1.000 pounds of direct materials at an average cost per pound of $19 and 625 direct manufacturing labor hours at an average wage of $11.75 per hour.
1. The direct material price variance during July is .
a. $1,100 unfavorable
b. $1,100 favorable
c. $1,000 unfavorable
d. $2,000 unfavorable
2. The direct material efficiency variance during July is .
a. $ 1,000 unfavorable
b. $1,100 favorable
c. $2,000 unfavorable
d. $1,000 favorable
3. The direct manufacturing labor price variance during July is _.
a. $375.00 unfavorable
b. $156.25 favorable
c. $243.75 favorable
d. $ 1, 000 unfavorable
4. The direct manufacturing labor efficiency variance during July is .
a. $300.00 unfavorable
b. $156.25 favorable
c. $143.75 favorable
d. $131.75 unfavorable

Answer 1

Answer and Explanation:

1. The computation of the material price variance is shown below:

= Actual Quantity × (Standard Price - Actual Price)

= 1,000 × ($20 - $19)

= $1,000 favorable

2. The computation of the direct material efficiency variance is shown below:

= Standard Price × (Standard Quantity - Actual Quantity)

= $20 × (3,000 pounds × 0.30 pounds - 1,000)

= $20 × (900 - 1,000)

= $2,000 unfavorable

3.The computation of the labor price variance is shown below:

= Actual Hours × (Actual rate - standard rate)

= 625 × ($11.75 per hour - $12 per hour)

= 625 × $0.25 per hour

= $156.25 favorable

4. The computation of the labor efficiency variance is shown below:

= Standard Rate × (Actual hours - Standard hours)

= $12 per hour × (625 hours - 3,000 containers × 0.20 hours)

= $12 per hour × 25 hours

= $300 unfavorable

If the standard cost is more than actual one so it would be favorable variance e and if the actual cost is more than the standard one so it would be unfavorable variance