Question
Premium Guard, which used a standard cost accounting system, manufactured 190,000 boat fenders during the year, using 1,380,000 feet of extruded vinyl purchased at $1.25
Premium Guard, which used a standard cost accounting system, manufactured 190,000 boat fenders during the year, using 1,380,000 feet of extruded vinyl purchased at $1.25 per foot. Production required 4,900 direct labor hours that cost $16.00 per hour. The materials standard was 7 feet of vinyl per fender at a standard cost of $1.40 per foot. The labor standard was 0.028 direct labor hour per fender at a standard cost of $14.50 per hour.
Requirement 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor.
Begin with the variances for direct materials. First, determine the formula for the direct materials price variance, then compute the price variance for direct materials.
Actual quantity purchased (Actual price-Standard price) = DM price variance
1,380,000 ($1.25-$1.40)= $207,000 F
Determine the formula for the direct materials quantity variance, then compute the quantity variance for direct materials.
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