Question

Exercse Production DM usage DL usage Compute: Budget |Standards per unit 50 units a) Material Price Variance 4 bs. @ Br 0.50 per lb. c) Total Material Variance |2 hrs. @ Brl per hour b) Malterial Quanity Variance Actual | 30 units |140 Ibs @ Br l per Ib. |72 hours (a Br0.75 per hr. d Labor Rate Variance e) Labor Eficncy Varance h) Total Labor Variance

Answer 1

Let's break down the variances calculated based on the provided data.

Given Data

• Standard Production: 50 units
• Standard Material Cost: 4 lbs. @ Br 0.50 per lb.
• Actual Production: 30 units
• Actual Material Usage: 140 lbs. @ Br 1 per lb.
• Standard Labor Cost: 2 hrs. @ Br 0.75 per hour
• Actual Labor Usage: 72 hours @ Br 1 per hour

Step 1: Calculate the Standard Material Cost and Actual Material Cost

Standard Material Cost:

• Standard material required for 30 units = 30 units * 4 lbs/unit = 120 lbs
• Standard cost = 120 lbs x Br 0.50/lb = Br 60

Actual Material Cost:

• Actual cost = 140 lbs x Br 1/lb = Br 140

Step 2: Calculate Material Variances

a) Material Price Variance:

\[ \text{Material Price Variance} = (\text{Actual Price} - \text{Standard Price}) \times \text{Actual Quantity} \] \[ = (1 - 0.50) \times 140 = 0.50 \times 140 = Br 70 \text{ Unfavorable} \]

b) Material Quantity Variance:

\[ \text{Material Quantity Variance} = (\text{Actual Quantity} - \text{Standard Quantity}) \times \text{Standard Price} \] \[ = (140 - 120) \times 0.50 = 20 \times 0.50 = Br 10 \text{ Unfavorable} \]

c) Total Material Variance:

\[ \text{Total Material Variance} = \text{Material Price Variance} + \text{Material Quantity Variance} \] \[ = 70 + 10 = Br 80 \text{ Unfavorable} \]

Step 3: Calculate the Standard Labor Cost and Actual Labor Cost

Standard Labor Cost:

• Standard labor hours needed for 30 units = 30 units * 2 hrs/unit = 60 hrs
• Standard labor cost = 60 hrs x Br 0.75/hr = Br 45

Actual Labor Cost:

• Actual cost = 72 hrs x Br 1/hr = Br 72

Step 4: Calculate Labor Variances

d) Labor Rate Variance:

\[ \text{Labor Rate Variance} = (\text{Actual Rate} - \text{Standard Rate}) \times \text{Actual Hours} \] \[ = (1 - 0.75) \times 72 = 0.25 \times 72 = Br 18 \text{ Unfavorable} \]

e) Labor Efficiency Variance:

\[ \text{Labor Efficiency Variance} = (\text{Actual Hours} - \text{Standard Hours}) \times \text{Standard Rate} \] \[ = (72 - 60) \times 0.75 = 12 \times 0.75 = Br 9 \text{ Unfavorable} \]

f) Total Labor Variance:

\[ \text{Total Labor Variance} = \text{Labor Rate Variance} + \text{Labor Efficiency Variance} \] \[ = 18 + 9 = Br 27 \text{ Unfavorable} \]

Summary of Variances

• Material Price Variance: Br 70 Unfavorable
• Material Quantity Variance: Br 10 Unfavorable
• Total Material Variance: Br 80 Unfavorable
• Labor Rate Variance: Br 18 Unfavorable
• Labor Efficiency Variance: Br 9 Unfavorable
• Total Labor Variance: Br 27 Unfavorable

Feel free to ask if you have any further questions or need additional calculations!