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3 years ago

Calculate the material and labor variances.

Business

1 answer:

Mnenie [13.5K]3 years ago

5 0

Answer:

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

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Explanation:

(1) The journal entry for the transaction will be

Apr 1 Dr : Cash $18,270, Cr : common stock $18,270

Apr1 Dr: salary payable$381,Cr: cash $381

Apr 2 No entry required

Apr 3 Dr : supplies $1,320, Cr : Account payable $1,320

Apr 10 Dr Account Receivable $1,929, Cr : service revenue $1,929

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Apr 30 Dr : $ Account Payable $305 Cr : Cash $305

(2) The T Account will be

Cash Account

Dr common stock $18,270, unearned revenue $711, service revenue $2,842

Cr : salary payable $381, salary expense $1,524, Account payable $305,Bal c/d $19,613 Total Dr $21,823, Cr : $21,823

Salary payable Account

Dr : cash $381,Cr: Balance c/d $381 Total Dr $381,Cr :$381

Account Receivable Account

Dr: service revenue $1,929, Cr: Balance c/d $1,929 Total Dr $1,929, Cr $1,929

Salary expense Account

Dr: salary expense $1,524, Cr Balance c/d $1,524, Total Dr $1,524,Cr $1,524

Common Stock

Dr : Balance c /d $18,270, Cr :Cash $18,270 Total Dr $18,270, Cr $18,270

Supplies Account

Dr: Account payable $1,320, Cr Balance c /d $1,320, Total Dr $1,320, Cr $1,320

Account Payable

Dr: Cash $305,Balance c/d $1,015, Cr supplies $1,320, Total Dr $1,320, Cr $1,320

Service Revenue Account

Dr Balance c /d $4,771 Cr : Account Receivable $1,929, cash $2,842, Total Dr $4,771, Cr $4,771

Unearned Revenue Account

Balance c/d $711, Cr cash $711, Total Dr $711,Cr $711

(3) The trial balance as on 30/04/2017

Dr: Cash $19,613, salary payable $381, supplies $1,320, Account Receivable $1,929, salary expense $1,524 Total $24,767

Cr : Common Stock $18,270, Account Payable $1,015, service revenue $4,771, unearned revenue $711 Total $24,767

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