Basil Tooling uses a standard cost system to account for the costs of its one product. Standards are 4 sheets of ½-inch steel at $110 per sheet and 14 hours of labor at a standard wage rate of $13. During July, Basil Tooling produced 600 units. Materials purchased and used totaled 2,540 sheets at a total cost of $268,850. Payroll totaled $112,930 for 8,770 hours worked. Calculate the:a. direct materials price variance.b. direct materials quantity variance.c. direct labor rate variance.d. direct labor efficiency variance.
What will be an ideal response?
a. $10,550 favorable = $268,850 - (2,540 × $110) = $268,850 - $279,400
b. $15,400 unfavorable = (2,540 × $110) - (600 × 4 × $110) = $279,400 - $264,000
c. $1,080 favorable = $112,930 - (8,770 × $13) = $112,930 - $114,010
d. $4,810 unfavorable = $114,010 - (600 × 14 × $13) = $114,010 - $109,200
Direct materials price variance = AQ × (SP - AP). Direct materials quantity variance = SP × (SQ - AQ). Direct labor rate variance = AH × (SR - AR). Direct labor efficiency variance = SR × (SH - AH).
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