Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards. Materials Item Per unit Cost Metal 1 lb. 63¢ per lb. Plastic 12 oz. $1.00 per lb. Rubber 4 oz. 88¢ per lb. Direct labor Item Per unit Cost Labor 15 min. $8.00 per hr. Predetermined overhead rate based on direct labor hours = $4.68 The January figures for purchasing, production, and labor are: The company purchased 231,800 pounds of raw materials in January at a cost of 78¢ a pound. Production used 231,800 pounds of raw materials to make 117,000 units in January. Direct labor spent 18 minutes on each product at a cost of $7.70 per hour. Overhead costs for January totaled $71,489 variable and $70,000 fixed. Answer the following questions about standard costs. 1). What is the Materials Price Variance? 2). What is the Material Quantity Variance? 3). What is the total materials variance? 4). What is Labor Price variance? 5). What is the Labor Quantity variance? 6). What is the Total Labor variance? 7). What is the total Overhead variance?
Waterways Corporation uses very stringent
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Materials |
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Item |
Per unit |
Cost |
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|
Metal |
1 lb. |
63¢ per lb. |
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|
Plastic |
12 oz. |
$1.00 per lb. |
||||
|
Rubber |
4 oz. |
88¢ per lb. |
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|
Direct labor |
||||||
|
Item |
Per unit |
Cost |
||||
|
Labor |
15 min. |
$8.00 per hr. |
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|
Predetermined |
The January figures for purchasing, production, and labor are:
|
The company purchased 231,800 pounds of raw materials in January at a cost of 78¢ a pound. |
|
Production used 231,800 pounds of raw materials to make 117,000 units in January. |
|
Direct labor spent 18 minutes on each product at a cost of $7.70 per hour. |
|
Overhead costs for January totaled $71,489 variable and $70,000 fixed. |
Answer the following questions about standard costs.
1). What is the Materials Price Variance?
2). What is the Material Quantity Variance?
3). What is the total materials variance?
4). What is Labor Price variance?
5). What is the Labor Quantity variance?
6). What is the Total Labor variance?
7). What is the total Overhead variance?
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