Answer:
Please see answer below
Explanation:
This is an incomplete question. However, other parts of the question have been added as extracted .
1. Determine the direct material price and quantity variances
Direct material price variance
= (Actual price - Standard price) × Purchase quantity
= ($0.85 - $1) × 103,000
= $15,450 Favorable
Direct material quantity variance
= (Actual quantity - Standard quantity) × Standard price
= (103,000 - 101,000) × $1
= $2,000 Unfavorable
2. Think of a plausible explanation for the variances found in requirement 1.
°For direct material price variance, the possible reasons for the variance are shortage of raw materials, discount application etc. However, variance was favorable because the direct material was purchased for lesser amount compared to the standard price.
°For direct material quantity variance, possible causes of variance are low quality of raw materials, incorrect specification of raw materials, damage during production processes. However, the variance was unfavorable because
the actual quantity used is more than the standard quantity that ought to have been used.
3. Determine the direct labor rate and efficiency variance
Direct labour rate variance
= (Actual rate - Standard rate) × Actual hours worked
= ($12.35 - $12.05) × 1,700
= $510 Unfavorable
Direct labor efficiency variance
= (Actual hours worked - Standard hours worked) × Standard rate
= (1,700 - 1,400) × $12.05
= $3,615 Unfavorable
4. Could the explanation for the labor variances be tied to material variances.
No. The total labor variance could be as a result of money paid to laborers which be could be lower or higher than the standard rate and using either less or more direct labor hours than expected.
