Homework SourseExercise 118 The following direct materials and direct labor
Exercise 11-8
The following direct materials and direct labor data pertain to the operations of Laurel Company for the month of August.
Costs
Quantities
(a)
Compute the total, price, and quantity variances for materials and labor.
| Costs | |||
| Actual labor rate | $14 | per hour | |
| Actual materials price | $270 | per ton | |
| Standard labor rate | $13.50 | per hour | |
| Standard materials price | $274 | per ton |
Solution
Material Price Variance = (SP – AP) * Actual Qty
SP = 274
AP = 270
Actual Qty = 1200 tons
= (274 – 270) * 1200 = 4800(Favourable)
Material Qty Variance = (SQ – AQ) * SP
SQ = 1180 tons
=(1180 – 1200) * 274 = 5480(Unfavourable)
Total Material Variance = Material Price Variance + Material Qty Variance
= 4800(F) + 5480(U) = 680(Unfavourable)
Labour Price Variance = (SR – AR) * Actual Hrs
SR = 13.50
AR = 14
Actual Hrs = 4900
= (13.50 – 14) * 4900 = 2450(Unfavourable)
Labour Quantity Variance = (Std Hrs – Actual Hrs) * SR
Std Hrs = 4980
= (4980 – 4900) * 13.50 = 1080(Favourable)
Total Labour Varaince = Labour Price Variance + Labour Quantity Variance
= 2450(U) + 1080(F) = 1370(Unfavourable)
