8 Calculate the total Price variance for direct material and

8) Calculate the total Price variance for direct material and the labor rate cost variance from the following data: Direct MaterialDirect Labor Planned price/unit Actual units Actual price/unit Actual cost 10.00 22.00 12,000 s 22.50 $ 86,025,000 270,000 9,300 9.25 $

Solution

Direct material price variance

= Actual quantity x Actual price – Actual quantity x Standard price

= 9,300 x $9.25 – 9,300 x $10

= $ 6,975 Favorable

The variance is favorable as the actual price is less than the standard price

Labor rate variance

= Actual quantity x Actual rate – Actual quantity x Standard rate

= 12,000 x $22.50 – 12,000 x $22

= $ 6,000 Adverse

The variance is adverse as the actual rate is higher than the standard rate