Horton Company adopted a standard cost system several years ago. The standard costs for the prime costs of its single product are as follows: Material: 8 kilograms @ $5 per kilogram$40.00 Labor: 6 hours @ $8.20 per hour$49.20 The following operating data were taken from the records for November: Units completed 5,600unitsBudgeted output 6,000unitsPurchase of materials 50,000kilogramsTotal actual labor costs$300,760 Actual labor hours 36,500hoursMaterial efficiency (quantity) variance$1,500unfavorableTotal material variance$750unfavorableRequired:(Be sure to indicate whether the variances are favorable or unfavorable and show your work.) a. What is the direct labor rate variance for November?b. What is the direct labor efficiency variance for November?c. What is the

Question

actual kilograms of material used in the production process during November?d. Assume the purchasing department is responsible for the material price variance, what is the actual price paid per kilogram of material during November (assume no increase/decrease in inventory during the month)?

What will be an ideal response?

Answer 1

a. ($300,760/36,500 - $8.20) × 36,500 = $1,460 unfavorable. 
b. [36,500 - (6 × 5,600)] × $8.20 = $23,780 unfavorable. 
c. [AQ-used - (8 × 5,600)] × $5.00 = $1,500 unfavorable; AQ-used = 45,100. 
d. 750 U = $1,500 U + Price variance; Price variance = $750 F; (AP - $5.00) × 50,000 = $750 favorable; AP = $4.985.