Question

Nolan Mills uses a standard cost system. During May, Nolan manufactured 15,000 pillowcases, using 27,300 yards of fabric costing $3.05 per yard and incurring direct labor costs of $17,278 for 3,260 hours of direct labor. The standard cost per pillowcase assumes 1.75 yards of fabric at $3.10 per yard, and 0.20 hours of direct labor at $5.95 per hour. a. Compute both the price variance and quantity variance relating to direct materials used in the manufacture of pillowcases in May. b. Compute both the rate variance and efficiency variance for direct labor costs incurred in manufacturing pillowcases in May.

Answer 1

Answer:

direct materials price variance =  1.365 Favourable

direct materials quantity variance    =3,255 Adverse

direct labor rate variance  = 2,119 Adverse

direct labor efficiency variance  = 4,973 Adverse

Explanation:

direct materials price variance = Aq×Ap -Aq×Sp

                                                  =(27,300×$3.05)-(27,300×$3.10)

                                                  = 1.365 Favourable

direct materials quantity variance = Aq×Sp-Sq×Sp

                                                        = (27,300×$3.10)-(26,250×$3.10)

                                                        =3,255 Adverse

direct labor rate variance  = Aq×Ap -Aq×Sp

                                           =(3,260×$5.95)-(3,260×$5.30)

                                           = 2,119 Adverse

direct labor efficiency variance = Aq×Sp-Sq×Sp

                                                    = (3,260×$3.95)-(3,000×$5.95)

                                                    = 4,973 Adverse