Answer:
A. Actual quantity used per unit of output = 0.714 pounds
B. Direct Material Quantity Variance = $20,000 (unfavorable)
C. standard quantity used per unit of output = 0.464 pounds
D. Direct-labor rate variance = $35,000 (unfavorable)
E. Standard rate per unit of input = $20
F. Standard quantity per unit of output = 4hours
Explanation:
A variance analysis is a process of comparing a base plan also called standard to the Actual results. The output of a variance analysis indicates if the Actual result is favourable (meaning better than forecasted) or not favourable (falling below plan) or it could be a match (both equal out)
In costing analysis, we look at various elements of the cost breakdown and determine if our actual costs was either favourable, unfavourable or no difference compared to a standard cost predefined.
The following steps will help recover our records:
Step A. Determine Direct Material Quantity Variance.
Direct Material total Variance = Direct Material Quantity Variance + Direct Material Price Variance
Our Direct Material total Variance is $10,000 (favourable)......(a)
While our Direct Material Price Variance = Actual Material Cost minus Actual Quantity at standard Material Price = (?) - (10,000 x $8) = -$30,000 (favourable)......(b)
We need to determine ?, actual material cost
? = -$30,000 + $80,000 = $50,000
Direct Material Quantity Variance will therefore be (a) minus (b) = -$10,000 minus -$30,000 = $20,000 (unfavourable)
Step B. Determine Actual Material Usage rate.
If actual Cost = $50,000
And price per unit of input = $7,
It implies total unit of material input = $50,000 divided by $7
= 7,143 pounds
If 7,143 units produced 10,000 units of products. The consumption per unit = 7,143 divided by 10,000 = 0.714 pounds
Step C. Determine the standard Usage Rate.
Material Usage Variance = standard quantity specified for actual production minus the actual quantity used at the standard purchase price
if Material Quantity variance is $20,000 (unfavorable)
This implies -$20,000 = ? Minus (7,143 x $8)
We need to determine ?
Standard quantity (?) = -$20,000 + $57,144
= $37,144.
Standard quantity therefore is $37,144 divided by 8 = 4,643 pounds and standard quantity per unit of output = 4,643 / 10,000
=0.464 pounds
Step D. Determine Direct Labour rate Variance
Direct-labor rate variance +
Direct-labor efficiency variance = Total of direct labor variance
$65,000 = ? + $100,000
Direct-labor rate variance = $65,000 minus $100,000
= -$35,000 (unfavorable)
Step E. Determine Standard rate per unit of input
Direct labor price variance = (Standard rate – Actual rate) x Actual Hours
-$35,000 = (SR - $21) x (3.5 x 10,000)
SR = $20.
Step F. Determine Direct labor quantity Variance
Direct labor quantity variance = Standard Rate x (Standard Hours – Actual Hours)
$100,000 = $20 x ( SH - 35,000)
SH = 40,000 hours
Standard rate = 40,000 hrs / 10,000units = $4
