# P8-6. Analysis of Materials and Labor Variances### LO3RDI Products Co. manufactures a variety of products made of plastic and aluminum components. During the winter months, substantially all of the production capacity is devoted to the production of lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year.The company has developed standard costs for its several products. Standard costs for each year are set in the preceding October. The standard cost of a sprinkler for the current year is $3.70, computed as follows:#### Direct Materials:- Aluminum – 2 lb @ $.40 per lb...................... $ .80- Plastic – 1.0 lb @ $.38 per lb....................... .38- Production labor – 3 hr @ $.80 per hr........ 2.40- Factory overhead........................................ .84**Total.......................................................... $3.70**During February, RDI Products manufactured 8,500 good sprinklers. The company incurred the following costs, which it charged to production:#### Materials Requisitioned for Production:- Aluminum – 1,900 lb @ $.40 per lb................ $ 760- Plastic – Regular grade—6,000 lb @ $.38 per lb......... 2,280- Low grade—3,500 lb @ $.38 per lb.......................... 1,330- Production labor – 2,700 hr @ $.80 per hr................ 2,320- Factory overhead................................................... 7,140**Total Costs Charged to Production.................... $34,730**Materials price variations are not determined by usage but are charged to a materials price variation account at the time of purchase. All materials are carried in inventory at standard prices. Materials purchases for February were as follows:- Aluminum – 1,800 lb @ $.48 per lb................. $ 864- Plastic – Regular grade—3,000 lb @ $.50 per lb........... 1,500- Low grade—6,000 lb @ $.28 per lb....................... 1,740*Note: Due to plastic shortages, the company was forced to purchase lower-grade plastic than called for in the standards. This increased the number of sprinklers rejected on inspection.*### REQUIRED:Calculate price and usage variances for each type of material and for labor, using the formulas in *Determination of Variances* **Problem 8-6**This table is designed to help analyze variances in materials and labor, useful for understanding cost management in a production setting. The table is divided into two main sections: materials quantity variance and materials purchase price variance, along with labor efficiency and labor rate variance.### Materials Quantity Variance- **Aluminum** - **Standard Quantity or Hours**: ______ lbs. - **Actual Quantity or Hours**: ______ lbs. - **Difference**: ______ - **Standard Price/Rate**: _______ /lb. - **Variance**: ______- **Plastic** - **Standard Quantity or Hours**: ______ lbs. - **Actual Quantity or Hours**: ______ lbs. - **Difference**: ______ - **Standard Price/Rate**: _______ /lb. - **Variance**: ______### Labor Efficiency Variance- **Standard Quantity or Hours**: ______ hrs.- **Actual Quantity or Hours**: ______ hrs.- **Difference**: ______- **Standard Price/Rate**: _______ /hr.- **Variance**: ______### Materials Purchase Price Variance- **Aluminum** - **Standard Price/Rate**: ______ /lb. - **Actual Price/Rate**: ______ /lb. - **Difference**: ______ - **Actual Quantity or Hours**: ______ lbs. - **Variance**: ______- **Plastic - Regular Grade** - **Standard Price/Rate**: ______ /lb. - **Actual Price/Rate**: ______ /lb. - **Difference**: ______ - **Actual Quantity or Hours**: ______ lbs. - **Variance**: ______- **Plastic - Low Grade** - **Standard Price/Rate**: ______ /lb. - **Actual Price/Rate**: ______ /lb. - **Difference**: ______ - **Actual Quantity or Hours**: ______ lbs. - **Variance**: ______### Labor Rate Variance- **Standard Price/Rate**: ______ /hr.- **Actual Price/Rate**: ______ /hr.- **Difference**: ______- **Actual Quantity or Hours**: ______ hrs.- **Variance**: ______This table provides a structured approach to detail and compare the standard and actual metrics for each variable, calculate the

Variance is defined as the difference between the standard cost and the actual cost of the actual output.

RDI Products Co. manufactures a variety of products made of plastic and aluminum components. During the winter months, substantially all of the production capacity is devoted to the production of lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year. The company has developed standard costs for its several products. Standard costs for each year are set in the preceding October. The standard cost of a sprinkler for the current year is $3.70, computed as follows: Direct materials Aluminum-2 Ib e s40 per Ib. S 08 Plastic-1.0 e $38 per b. 38 Production labor-3hr S.00 per hr 240 Factory overhead Total.......... $3.70 During February, RDI Products manufactured 8,500 good sprinklers. The company incurred the following costs, which it charged to production: Materials requisisoned for production: Aluminum-1,900 Ibes40 per ib.. $ 760 Plastic-Regular grade-6,000 be s38 per b 2.20 Low grade-3.500 Ibe $38 per lb 1,330 Production labor-2,700 hre S8.60 per hr 23.220 Factory overhead.. 7,140 Costs charged to production $34.730 Materials price variations are not determined by usage but are charged to a materials price variation account at the time of purchase. All materials are carried in inventory at standard prices. Materials purchases for February were as follows: Aluminum-1,800 be S48 per b. $ 864 Plastic-Regular grade-3.000 Ib S.50 per Ib Low grade -6,000 b $29 per b . 1.500 1,740 "Due to plastic shortages, the company was forced to purchase lower-grade plastic n than called for in the standards. This increased the number of sprinklers rejected on inspection REQUIRED: Calculate price and usage variances for each type of material and for labor, using the formulas in Determination of Variances on pages 421-422 and 424.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q