Answered: Direct materials cost variance = (AC -…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Premium Fender, which uses a standard cost system, manufactured

20,000 boat fenders during 2018, using 144,000 square feet of extruded vinyl purchased at $1.05 per square foot. Production required 460 direct labor hours that cost $15.50 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.10 per square foot. The labor standard was 0.025 direct labor hour per fender, at a standard cost of $14.50 per hour

(I don't understand how to find the numbers for the direct materials and direct labor. For example: AC, SC, AQ, SQ or if it is favorable or unfavorable)

	Direct Materials	Direct labor
Actual Cost (AC)
Standard Cost (SC)
Actual Quantity (AQ)
Standard Quantity (SQ)

Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U).(Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)

		Formula		Variance
Direct materials cost variance	=	(AC - SC) x AQ	=	$7,200	F
Direct labor cost variance	=	(AC - SC) x AQ	=	$460	U

Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U).(Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)

		Formula		Variance
Direct materials efficiency variance	=	(AQ - SQ) x SC	=
Direct labor efficiency variance	=	(AC - SC) x AQ	=

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