Question
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 thestandardsthat have been set for the desks, the factory should work 780 direct labor-hours each month and produce 3,900 desks.
Atstandard, each desk should require 3.1 yards of material at $6.40 per yard.
Thestandardcosts associated with this level of production are as follows:
Total | Per Unit of Product | ||
Direct materials | $ | 77,376 | $ 19.84 |
Direct labor | $ | 12,090 | 3.10 |
Variable manufacturing overhead (based on direct labor-hours) | $ | 3,120 | 0.80 |
$ 23.74 | |||
During April, the factoryactuallyworked only 750 direct labor-hours and produced 4,000 desks. The followingactualcosts 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:
- Calculate the Material Quantity Variance and state whether it is Favorable (F) or Unfavorable (U). Show your workings
- Calculate the Material Price Variance and state whether it is Favorable (F) or Unfavorable (U.) Show your workings
- Calculate the Labor Rate Variance and state whether it is Favorable (F) or Unfavorable (U.) Show your workings
- Calculate the Labor Efficiency Variance and state whether it is Favorable (F) or Unfavorable (U.) Show your workings
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