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The following July information is for NOW Company: Standards: Material 3
The following July information is for NOW Company:
Standards:
Material 3.0 feet per unit @ ?4.20 per foot
Labor 2.5 hours per unit @ ?7.50 per hour
Actual:
Production 2,750 units produced during the month
Material 8,700 feet used; 9,000 feet purchased @ ?4.50 per foot
Labor 7,000 direct labor hours @ ?7.90 per hour
What is the material quantity variance?
What is the material price variance (calculated at point of purchase)?
What is the labor rate variance?
Expert Solution
a) Computation of Material Quantity Variance:
Material Quantity Variance = (Standard Quantity for Actual Production - Actual Quantity)*Standard Price
= (2750*3-8700)*4.20
= 1890 Unfavourable
b) Computation of Material Price Variance:
Material Price Variance = (Standard Price - Actual Price)*Actual Units Purchased
= (4.20-4.50)*9000
= 2700 Unfavourable
c) Computation of Labour Rate Variance:
Labour Rate Variance = (Standard Rate-Actual Rate)*Actual Hours Worked
= (7.50-7.90)*7000
= 2800 Unfavourable
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