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Question
Direct
Materials Direct Labour
Actual price per unit of input (kg and hours) $32 $15
Standard price per unit of input $30
$14
Standard input allowed per unit of output 5kg 6
hours
Actual units of input  36,000 kg
50,000 hours
Actual units of output (product) 7,500
7500

Assume that the quantity of direct materials purchased, and the quantity used are identical. Given the
above information, what are the price and rate variances of direct materials and direct labour respectively? 

Answered by Expert Tutors 숨

Calculation of Material Price and Quantity variance

Material Price variance = ( Actual rate - Standard rate ) * Actual quantity

= (32 - 30) * 36000
= $ 72000 (unfavorable)

Material Quantity variance = (Actual quantity - standard quantity) * Standard rate

= (36000 - 37500)* 30
= $ 45000 (favorable)

Labour Rate variance = ( Actual rate - Standard rate ) * Actual hours

= (15-14) * 50000
= $ 50000 (unfavorable)

Labour E ciency variance = (Actual hours - standard hours) * Standard rate per hour
= (50000 - 45000) * 14
= $ 70000 (unfavourable)

Step-by-step explanation

Budgeted rate of Material = $30.00 per kg

Budgeted rate of Labour = $14.00 per hour
Actual rate of Material = $32.00 per kg
Actual rate of Labour = $15.00 per hour
Actual quantity produced = 7500 units
So, Standard quantity of material = 5kg per unit * 7500 unit = 37500 units
So, Standard hours of labour = 6 hrs per unit * 7500 unit = 45000 hours.

Calculation of Material Price and Quantity variance

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Material Price variance = ( Actual rate - Standard rate ) * Actual quantity Answers in as fast as 15 minutes
 = (32 - 30) * 36000
= $ 72000 (unfavorable)

Material Quantity variance = (Actual quantity - standard quantity) * Standard rate

= (36000 - 37500)* 30
= $ 45000 (favorable)

Labour Rate variance = ( Actual rate - Standard rate ) * Actual hours

= (15-14) * 50000
= $ 50000 (unfavorable)
Labour E ciency variance = (Actual hours - standard hours) * Standard rate per hour
= (50000 - 45000) * 14
= $ 70000 (unfavourable)

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