During June, Fraser Company's material purchases amounted to 6,000 pounds at a price of $7.35 per pound. Actual costs incurred in the production of 2,000 units were as follows: Direct labor: $116,935 ($18.20 per hour) Direct material: $32,340 ($7.35 per pound) The standards for one unit of Fraser Company's product are as follows:
Direct labor: Direct material: Quantity, 3.1 hours per unit Quantity, 2.1 pounds per unit Rate, $18 per hour Price, $7.10 per pound Required:
Compute the direct-material price and quantity variances, the direct-material purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
What will be an ideal response?
| Direct-material price variance | = | AQ(AP - SP) |
| ? | = | 4,400*($7.35 - $7.10) |
| ? | = | $1,100 Unfavorable |
| *AQ = 4,400 pounds = $32,340 ÷ $7.35 per pound |
| ? | ||
| Direct-material quantity variance | = | SP(AQ - SQ) |
| ? | = | $7.10(4,400 - 4,200*) |
| ? | = | $1,420 Unfavorable |
| ? |
| *SQ = 4,200 pounds = 2,000 units × 2.1 pounds per unit | ||
| ? | ||
| Direct-material purchase price variance | = | PQ(AP - SP) |
| ? | = | 6,000($7.35 - $7.10) |
| ? | = | $1,500 Unfavorable |
| ? |
| Direct-labor rate variance | = | AH(AR - SR) |
| ? | = | 6,425*($18.20 - $18.00) |
| ? | = | $1,285 Unfavorable |
| ? | ||
| *AH = 6,425 hours = $116,935 ÷ $18.20 per hour |
| ? | ? | ? |
| Direct-labor efficiency variance | = | SR(AH - SH) |
| ? | = | $18(6,425 - 6,200*) |
| ? | = | $4,050 Unfavorable |
| ? |
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