Question

Wilson's Winter Woolens manufactures jackets and other wool clothing. A certain designed ski parka requires the following: Direct materials standard 2 square yards at $13.50 per yard Direct manufacturing labor standard 1.5 hours at $20.00 per hour During the third quarter, the company made 1,500 parkas and used 3,150 square yards of fabric. They purchased 5,000 yards of fabric for $68,750. Direct labor totaled 2,100 hours for $45,150. Required: a. Compute the direct materials price and efficiency variances for the quarter. b. Compute the direct manufacturing labor price and efficiency variances for the quarter.

Answer 1

Answer:

1. Direct material price variance = $26,208 favorable

Direct material efficiency variance = $2,025 adverse

2. Labor rate variance = $3,150 adverse

Labor efficiency variance = $3,000 Favorable

Explanation:

1. Direct materials variances:

Actual unit cost = $68,750 ÷ 3,150 square yards

= $21.82 per square yard

Standard quantity 2 × 1,500

= 3,000 square yards

Direct material price variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price)

= (3,150 × $21.82) - (3,150 × $13.50)

= $68,733 - $42,525

= $26,208 favorable

Direct material efficiency variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard price)

= (3,150 × $13.50) - (3,000 × $13.50)

= $2,025 adverse

2. Actual Rate = $45,150 ÷ 2,100

= $21.5 per hour

Standard hour = 1.5 × 1,500

= 2,250 hours

Labor rate variance = (Actual hour worked × Actual rate) - (Actual hours worked × standard rate)

(2,100 × $21.5) - (2,100 × $20)

= $3,150 adverse

Labor efficiency variance = (Actual hour worked × Standard rate) - (Standard hours allowed × Standard rate)

= (2,100 × $20) -(2,250 × $20)

= $3,000 Favorable