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Hearty Company produces a standing desk that is very useful for people with back pain. The company uses a standard cost system to help the
Hearty Company produces a standing desk that is very useful for people with back pain. The company uses a standard cost system to help the control of costs. According to the standards that have been set for the desks, the factory should work 780 direct labor-hours each month and produce 3,900 desks. At standard, each desk should require 3.1 yards of material at $6.40 per yard. The standard costs associated with this level of production are as follows: Direct materials Direct labor Per Unit Total of Product $ 77,376 $ 19.84 $ 12,090 3.10 Variable manufacturing overhead $ 3,120 0.80 (based on direct labor-hours) $23.74 During April, the factory actually worked only 750 direct labor-hours and produced 4,000 desks. The following actual costs were recorded during the month: Total Per Unit of Product Direct materials (13,600 yards) $ 81,600 $ 20.40 Direct labor $ 13,200 3.30 Variable manufacturing overhead $ 6,800 1.70 $ 25.40 All of the materials purchased during the month were used in production. Required: 1. Calculate the Material Quantity Variance and state whether it is Favorable (F) or Unfavorable (U). Show your workings 2. Calculate the Material Price Variance and state whether it is Favorable (F) or Unfavorable (U.) Show your workings 3. Calculate the Labor Rate Variance and state whether it is Favorable (F) or Unfavorable (U.) Show your workings 4. Calculate the Labor Efficiency Variance and state whether it is Favorable (F) or Unfavorable (U.) Show your workings
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