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Mittrell Company produces chairs and has determined the following direct cost categories and budgeted amounts: Standard Inputs Standard Cost Category for 1 output per input

Mittrell Company produces chairs and has determined the following direct cost categories and budgeted amounts:

Standard Inputs Standard Cost

Category for 1 output per input

Direct Materials 1.00 $9.50

Direct Labour 0.60 12.00

Direct Marketing 0.20 2.50

Actual performance for the company is shown below:

Actual output: (in units) 5,000

Direct Materials:

Materials costs $41,625

Input purchased and used 4,500

Actual price per input $9.25

Direct Manufacturing Labour:

Labour costs $35,125

Labour-hours of input 2,810

Actual price per hour $12.50

Direct Marketing Labour:

Labour costs $3,080

Labour-hours of input 1,100

Actual price per hour $2.80

Required:

Calculate rate and efficiency variance for direct material.

Formula

DM Rate Variance = (AR-SR) X Actual Input quantity

DM Efficiency Variance = (Actual input quantity Budgeted quantity allowed for actual output) X SR

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