Question 8 of 10 100 points Amber Company produces iron tabl

Question 8 (of 10) 1.00 points Amber Company produces iron table and chair sets. During October, Amber\'s costs were as follows Actual purchase price Actual direct labor rate Standard purchase price S1.60 per lb. $6.80 per hour $1.40 per b Standard quanthy for sets produced Standard drect labor hours alowed Actual quantity purchased in October Actual direct labor hours 900,000 ibs. 1,045,000 lbs 930,000 os. 15,000 10,000 $4,800 Actual quantity used in October Direct labor tate variance Required: 1. Calculate the total cost of purchases for October 2. Compute the drect materials price variance based on quanty purchased. (Indicate the effect of each varlance by selectin 3. Calculate the direct materials quantity variance based on quantity used. (Indicate the efflect of each varlance by selecting \"

Solution

Req. 1

Total purchases = AP × AQ (purchased) = $1.60 × 1,045,000 = $1,672,000

Req. 2

Direct materials price variance = AQ x (SP – AP)

= 1,045,000 x ($1.40 – $ 1.60)

= $209,000 U

Req. 3

Material quantity variance = SP x (SQ – AQ)

= $1.40 x (900,000 – 930,000)

= $42,000 U

Req. 4

Since the labor rate variance is favorable, the actual cost of direct labor must be $4,800 less than the standard cost.

Direct labor rate variance = AH x (SR – AR)

$4,800 = 10,000 x ($X – $ 6.80)

($X – $ 6.80) = 0.48

$X = 6.80+0.48 = $7.28

standard rate of $7.28.

Req. 5

Since the actual hours are 5,000 less than the standard, the efficiency variance is 5,000 hours x $7.28 = $36,400 F.

Direct labor efficiency variance = SR x (SH – AH)

= $7.28 x (15,000 – 10,000)

= $36,400 F