Question

Calculate the material and labor variances.

Premium ​Guard, which uses a standard cost accounting​ system, manufactured 190,000 boat fenders during the​ year, using 1 comma 380,000 feet of extruded vinyl purchased at $ 1.30 per foot. Production required 4,900 direct labor hours that cost $ 15.50 per hour. The material's standard was 7 feet of vinyl per fender at a standard cost of $ 1.45 per foot. The labor standard was 0.028 direct labor hour per​ fender, at a standard cost of $ 14.00 per hour.

Answer 1

Direct material Price variance = $207,000 Favorable

Direct material quantity variance = -$72,500 Unfavorable

Direct labor Rate variance = -$7,350 Unfavorable

Direct efficiency variance = $5,880 Favorable

Explanation:

The computation of material and labor variances is shown below:-

Direct material Price variance = (Standard rate - actual rate) × Actual quantity

= ($1.45 - $1.30) × 1,380,000

= $0.15 × 1,380,000

= $207,000 Favorable

Direct material quantity variance = (Standard quantity - actual quantity) × standard rate

= ((190,000 × 7) - 1,380,000) × $1.45

= (1,330,000 - 1,380,000) × $1.45

= -50,000 × $1.45

= -$72,500 Unfavorable

Direct labor Rate variance = (Standard rate - Actual rate) × Actual hour

= ($14.00 - $15.50) × 4,900

= -$1.5 × 4,900

= -$7,350 Unfavorable

Direct efficiency variance = (Standard hours - actual hours) × Standard rate

= ((190,000 × 0.028) - 4,900) × $14.00

= (5,320 - 4,900) × $14.00

= 420 × $14.00

= $5,880 Favorable

The favorable variance is the variance in which the standard is more than the actual one and the unfavorable variance is the variance in which the standard is less than the actual one