Ajax Inc. is one of the customers of a well-known linen manufacturing company. Ajax has not ordered linen in some time, but when
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Answer:
1. Material Variances
Material Price Variance = $3,000 F
Material Quantity Variance = $4,000 U
2. Labor Variances
Labor Rate Variance = $1,425 U
Labor Efficiency Variance = $900 F
Explanation:
Provided information we have,
Direct Materials
Standard Quantity = 4.6 pounds
Standard Rate = $2.50 per pound
Direct Labor
Standard Hours = 0.2 hour per unit
Standard Rate = $18 per hour
Actual Materials
Actual Quantity = 20,000 pounds
Actual Rate = $2.35 per pound
Actual Labor
Labor Hours = 750 hours
Labor Cost = $14,925
Labor rate =
Actual Units produced = 4,000
1. Material Variances
= ($2.50 - $2.35) 20,000 pounds
= $3,000
As the actual rate is less than standard rate the variance is favorable.
Standard Quantity = 4,000 4.6 = 18,400 pounds
Material Quantity Variance = (18,400 - 20,000) $2.50
= - $4,000
As the actual raw material quantity used is higher than standard raw material quantity the variance is unfavorable.
2. Labor Variances
= ($18 - $19.9) 750 = - $1,425
As actual rate is higher than standard rate thus the variance is unfavorable.
Standard Hours = 4,000 0.2 = 800
Labor Efficiency Variance = (800 - 750) $18
= $900
As the Standard Hours is more than Actual Hours the variance is favorable.
1. Material Variances
Material Price Variance = $3,000 F
Material Quantity Variance = $4,000 U
2. Labor Variances
Labor Rate Variance = $1,425 U
Labor Efficiency Variance = $900 F