Explore BrainMass

Explore BrainMass

    Direct Material Price and Quantity and Direct Labor Rate and Efficiency

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    See the attached file.

    PROBLEM 3

    Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product.

    Standard Standard Standard
    Quantity Price Cost

    Direct material 8 pounds $ 1.80/pound $ 14.40
    Direct labor .25 hour $ 8.00/hour 2.00
    $ 16.40

    During November, Arrow purchased 160,000 pounds of direct material at a total cost of $ 304,000. The total factory wages for November were $ 42,000, 90 percent of which were for direct labor. Arrow manufactured 19,000 units of product during November using 142,500 pounds of direct material and 5,000 direct labor hours.

    a) The total direct material price variance for November is:
    b) The total direct material quantity variance for November is:
    c) The total direct labor rate variance for November is:
    d) The total direct labor efficiency variance for November is:?

    © BrainMass Inc. brainmass.com December 24, 2021, 10:52 pm ad1c9bdddf
    https://brainmass.com/business/labour-management-and-relations/direct-material-price-quantity-direct-labor-rate-efficiency-514961

    Attachments

    SOLUTION This solution is FREE courtesy of BrainMass!

    See the attached file.

    Materials purchased
    160,000 pounds of direct material for $304,000 = $0.53 / pound

    Factory wages
    $42,900 - 90% direct labor = $38,610

    Manufactured
    19,000 units using 142,500 pounds material and 5,000 direct labor hours

    Labor
    Standard labor rate = $8.00
    Actual labor rate = $38,610 / 5000 = $7.72
    Standard labor hours = 19,000 x .25 = 4750

    a) Direct material price variance = (standard price - actual price) x actual quantity used

    (1.80 - 0.53) x 142,500

    1.27 X 142,500

    $180,975

    b) Direct material quantity variance = (Standard quantity allowed - actual quantity used) x standard price per unit

    ( 19000 x 8 - 142,500 ) x 1.80

    (152,000 - 142,500) x 1.80

    9500 x 1.80

    17,100

    c) Direct labor rate variance = Actual labor hours required x (actual labor rate paid - standard labor rate)

    5000 x ((38610/5000) - 8)
    5000 x (7.72-8)
    5000 x (-0.28)
    -1400

    d) Total direct labor efficiency variance = standard labor rate x (actual labor hours required - standard labor hours)

    $8.00 x (5000 - 4750)
    $8.00 x 250

    2000.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 10:52 pm ad1c9bdddf>
    https://brainmass.com/business/labour-management-and-relations/direct-material-price-quantity-direct-labor-rate-efficiency-514961

    Attachments

    ADVERTISEMENT