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Prado Corporation: Calculations of Materials & Labor Varian

Prado Corporation manufactures and sells a single product. The company uses a standard cost system. The standard cost per unit of product follows:

Materials - 1 lb plastic@$3.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.00
Direct labor- 1.6 hr@$10.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.00
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.45
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$23.45
The charges to the manufacturing department for November,
when 5,000 units were produced, follow:
Materials - 5,300 lb @$3.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,900
Direct labor - 8,200 hr@$9.80 . . . . . . . . . . . . . . . . . . . . . . . . . .80,360
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,815
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,075
The purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 pounds were purchased at a price of $2.90 per pound.

Required:
Calculate the following variances from standard costs for the data given,
1. Materials quantity.
2. Materials purchase price (at time of purchase).
3. Labor efficiency.
4. Labor rate.

Solution Summary

Your tutorial is attached in Excel. Click in cells to see calculations. This is a "grid" that lays out how to organize actual quantity (AQ), actual price (AP), standard quantity (SQ) and standard price (SP) to isolate the needed variances.

$2.19