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1) The standard cost to product one unit of product A includes 2 pounds of material at a standard cost of $ 4.00 per pound. During the month, 27,000 pounds of materials were purchased at a cost of $ 3.80 per pound and was used to produce 13,000 units of Product A
2) The standard labour cost to produce the unit includes 3 hours of work at an hourly rate of $ 10.00 per hour. For the month, 30,500 hours of labour are incurred at a cost of $ 10.10 per hour to produce 10,000 units.

You are asked to prepare reports showing:

a) The total materials Variance
b) The Price and Quantity materials Variance
c) The total Labour Variance
d) The Labour price and quantity Variance.

Respuesta :

anthougo

The preparation of reports showing the various required variances (total materials variance, the price and quantity materials variances, the total labor variance, and the labor price and quantity variances) are as follows:

a) The total materials Variance

= $1,400 Favourable ($104,000 - 102,600)

b) The Price and Quantity of Materials Variance:

1) Price of Materials Variance:

= $5,400 Favorable ($4.00 - $3.80) x 27,000

2) Quantity of Materials Variance:

= $4,000 Unfavorable (26,000 - 27,000) x $4.00

c) The total Labour Variance

= $8,050 Unfavorable ($30 - $30.805) x 10,500

d) The Labour price and quantity Variance

1) Labor Price Variance

= $3,050 Unfavorable ($10 - $10.10) x 30,500

2) Labor Quantity Variance

= $5,000 Unfavorable  (30,000 - 30,500) x $10

What variance analysis?

In cost accounting, variance analysis investigates the differences between actual costs and budgeted costs of materials, labor, and overhead.

Variance analysis helps management to take corrective actions after identifying the causes.

Data and Calculations:

Standard material cost for Product A = 2 pounds

Standard cost per pound = $4.00

Standard cost per unit = $8 ($4.00 x 2)

Total standard cost for materials = $104,000 ($8 x 13,000)

Purchase of materials = 27,000 pounds

Cost per pound = $3.80

Total purchase cost for materials = $102,600 ($3.80 x 27,000)

Production units = 13,000 units

Actal materials used per unit = 2.0769 pounds (27,000/13,000)

Actual cost per unit = $7.89 ($102,600/13,000)

Standard labor cost per unit = 3 hours

Standard rate of pay = $10

Standard labor cost per unit = $30 (3 x $10)

Totall standard labor hours = 30,000 (3 x 10,000)

Actual labor hours incurred = 30,500 hours

Labor rate per hour = $10.10

Total labor costs = $308,050 (30,500 x $10.10)

Production units = 10,000 units

Actual labor cost per unit = $30.805 ($308,050/10,000)

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