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The direct materials and direct labour standards for one bottle of Clean-All spray cleaner are given below: Standard Cost Direct materials Direct labour Standard Quantity Standard Price or Hours or Rate 7
The direct materials and direct labour standards for one bottle of Clean-All spray cleaner are given below: Standard Cost Direct materials Direct labour Standard Quantity Standard Price or Hours or Rate 7.0 millilitres $ 0.32 per millilitre 0.2 hours $12.00 per hour $2.24 $2.40 During the most recent month, the following activity was recorded: a. 29,000 millilitres of material was purchased at a cost of $0.27 per millilitre. b. All of the material was used to produce 3,000 bottles of Clean-All. c. 725 hours of direct labour time was recorded at a total labour cost of $8,700. Required: 1. Compute the direct materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Materials price variance Materials quantity variance
2. Compute the direct labour rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (.e., zero variance).) Labour rate variance Labour efficiency variance
Expert Solution
1. Computation of direct materials price and quantity variances for the month:
Data for material variances:
| Actual bottles produced during the month | 3,000 bottles |
| Standard quantity of materials for actual production (3,000 bottles x 7 millilitres per bottle) | 21,000 millilitres |
| Actual quantity of materials used | 29,000 millilitres |
| Standard price per material | $0.32 per millilitre |
| Actual price per material | $0.27 per millilitre |
Material Price Variance = (Standard price - Actual price) x Actual Quantity of material
=($0.32 - $0.27) x 29,000 = $1,450 (F) Favorable
Material Quantity Variance = (Standard quantity - Actual quantity) x Standard price per material
= (21,000 - 29,000) x $0.32 = $2,560 (U) Unfavorable
2. Computation of direct labor rate and efficiency variances for the month:
Data for labour variances:
| Standard labour hours for actual production (3,000 units x 0.20 hours per bottle) | 600 hours |
| Actual labour hours | 725 hours |
| Standard Rate per labor hour | $12 per hour |
| Actual Rate per labor hour ($8,700 / 725 hours) | $12 per hour |
Labour Rate Variance = (Standard Rate - Actual Rate) x Actual labour hours
= ($12 - $12) x 725 hours = $0 No effect (Zero Variance)
Labour Efficiency Variance = (Standard labor hours - Actual labor hours) x Standard Rate per labor hour
= (600 - 725) x $12 = $1,500 (U) Unfavorable
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