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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