Valport Valve Company manufactured 15,600 units during March of a control valve used by milk processors in its Shreveport plant. Records indicate the following:
Direct labor 80,200 hr. at $10.95
Direct material purchased 50,000 lb. at $5.20
Direct material used 46,200 lb.
The control valve has the following standard prime costs.
Direct material 3 lb at $5.00 per lb. $15.00
Direct labor 5 hr. at $11.25 per hr. 56.25
Standard price cost per unit $71.25
1. prepare a schedule of standard production costs for March, based on actual production of 15,600 units.
2. For the month of March, compute the following variances, indicating whether each is favorable or unfavorable.
a. Direct material price variance
b. Direct material quantity variance
c. Direct labor rate variance
d. Direct labor efficiency variance
Direct material 15,600 units X 3 lbs. X $5.00 $ 234,000
Direct labor 15,600 units X 5 hrs. X $11.25 877,500
Total standard production ...
The solution explains the calculation of standard cost and various variance amounts.