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Homework answers / question archive / Homework 12: Direct cost variances #1 Plant, LLC manufactures stone planters
Homework 12: Direct cost variances
#1 Plant, LLC manufactures stone planters. The below information provides information for the
Outdoor Stone planter for the month of November. All direct materials purchased were used in
production (Direct Materials inventory did not change).
Volume (units of Outdoor Stone planter)
Sales
Manufacturing costs (in $):
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Master Budget
70,000
$1,260,000
420,000
455,000
147,000
80,000
Net operating income
158,000
Actual Results
90,000 $1,530,000 556,875
729,000 146,250 85,000 12,875
Additional information
Standards:
Wage Rate
$2.00 $13.00
247,500 $2.25 $13.50
Price per pound of DM
Direct Labor Rate
Actual:
Direct material quantity used
Price per pound of DM
1) What are the standard and actual quantity of materials per planter? What are the standard and
actual direct labor hours per planter? (2 points)
2) Calculate the direct materials price and efficiency variances. Specify whether variances are
favorable or unfavorable. (4 points)
3) Calculate the direct labor rate and efficiency variances. Specify whether variances are
1) Computation of standard and actual quantity of materials per planter, standard and actual direct labor hours per planter:
Standard Quantity Of Material Per Planter:
Standard material = Budgeted Unit * Standard Quantity * Standard Price Per Pound
$420,000 = 70,000 * SQ * $2
$420,000 = $140,000 * SQ
SQ = $420,000/$140,000= 3 Per Pound
So, Standard Quantity is 3 per pound.
Actual Quantity Of Material Per Planter:
Actual material = Actual Unit * Actual Quantity * Actual Price Per Pound
$556,875 = 90,000 * AQ * $ 2.25
$556,875 = 202,500 * AQ
AQ = $556,875 / 202,500 = 2.75 Per Pound
So, Actual Quantity is 2.75 per pound.
Standard Direct Labor Hour Per Planter:
Standard Direct Labor = Budgeted Unit * Standard Hour * Standard Rate Per Hour
$455,000 =70,000 * SH * $13
$455,000= 910,000 * SH
SH =$455,000 / 910,000
SH= 0.5 Hour
So, Standard Hour is 0.5
Actual Direct Labor Hour Per Planter:
Actual Direct Labor = Actual Unit * Actual Hour * Actual Rate Per Hour
$729,000 =90,000 * SH * $13.50
$729,000= 1,215,000 * SH
AH = $729,000 / 1,215,000
AH= 0.6 Hour
So, Actual Hour is 0.6
2) Computation of direct materials price and efficiency variances:
Direct Material Price Variance = (Standard Price - Actual Price)*Actual Quantity
= ($2-$2.25)*247,500
= -$61,875 Unfavorable
Direct Material Efficiency Variance = (Standard Quantity-Actual Quantity)*Standard Price
= (270,000-247,500)*$2
= 45,000 Favorable
3) Computation of direct labor rate and efficiency variances:
Direct Labor Rate Variance = (Standard Rate-Actual Rate)*Actual Hours
= ($13-$13.5)*54,000
= -$27,000 Unfavorable
Direct Labor Efficiency Variance = (Standard Hours-Actual Hours)*Standard Rate
= (45,000-54,000)*$13
= -$117,000 Unfavorable
