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Variances

On May 1, 2003 Goodman Company began the manufacture of a new mechanical device known as "Dandy'. The company installed cost system in accounting for manufacturing costs. The standard cost for a unit of "Dandy' are as follows:

Raw Materials 6 lbs @ $1 per lb. $6.00
DL 1 hour @ $4/ hr 4.00
OH 75% of DL costs 3.00

During May, 4,000 units of 'Dandy' were manufactured and 2,500 units were sold. The following data were obtained from Goodman's records for the month of May:

DEBIT CREDIT
Sales $50,000
Purchases (26,000 pounds) $27,300
Material price variance (U) 1,300
Material quantity variance (U) 1,000
DL rate Variance (U) 760
DL efficiency variance (F) 800

The amount shown above for material price variance is applicable to raw material purchased during May.

COMPUTE:
1. Standard Qty of raw materials allowed (in pounds).
2. Actual Qty of raw materials used (in pounds).
3. Actual price of raw materials purchased
4. Standard DL hours allowed
5. Actual DL rate
6. Give briefly one possible reason for each of the variances computed above.

Solution Summary

Calculates standard and actual quantities and variances.

$2.19