Corporation manufactured 1,000 units of Product A in March. Actual direct materials purchased were 8,000 liters at $17 per liter, with 7,000 liters used. Actual direct labor hours were 15,000 hours at $8 per hour. Standard prime costs per unit are $117 for 6.5 liters of direct materials at $18 per liter and $119 for 14 hours of direct labor at $8.50 per hour, for a total of $236. Variances must be calculated for direct material price, quantity, labor rate, and efficiency and possible causes identified.
Corporation manufactured 1,000 units of Product A in March. Actual direct materials purchased were 8,000 liters at $17 per liter, with 7,000 liters used. Actual direct labor hours were 15,000 hours at $8 per hour. Standard prime costs per unit are $117 for 6.5 liters of direct materials at $18 per liter and $119 for 14 hours of direct labor at $8.50 per hour, for a total of $236. Variances must be calculated for direct material price, quantity, labor rate, and efficiency and possible causes identified.
Corporation manufactured 1,000 units of Product A in March. Actual direct materials purchased were 8,000 liters at $17 per liter, with 7,000 liters used. Actual direct labor hours were 15,000 hours at $8 per hour. Standard prime costs per unit are $117 for 6.5 liters of direct materials at $18 per liter and $119 for 14 hours of direct labor at $8.50 per hour, for a total of $236. Variances must be calculated for direct material price, quantity, labor rate, and efficiency and possible causes identified.
During March, Corporation manufactured 1,000 units of product A, and the accounting records
indicated the following:
Direct material purchased 8,000 liters at $17 per liter Direct material used 7,000 liters Direct labour 15,000 hours at $8 per hour Product A has the following standard prime costs per unit: Direct material: 6.5 liters @ $18 per liter $ 117/unit Direct labour: 14 hours @ $8.5 per hour 119 Standard prime cost per unit $236/ unit Required: 1. For the month of March, calculate the following variances, indicating whether each is favorable or unfavorable (3 marks) a) Direct material price variance (0.75 marks) b) Direct material quantity variance (0.75 marks) c) Direct labor rate variance (0.75 marks) d) Direct labor efficiency variance (0.75 marks) 2. Identify one possible cause for all direct material price variance, direct material quantity variance and direct labor efficiency variance as shown in question 1