Question
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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