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11 October, 12:28

The following direct materials and direct labor data pertain to the operations of Laurel Company for the month of August.

Costs

Actual labor rate $15 per hour

Actual materials price $220 per ton

Standard labor rate $14.50 per hour

Standard materials price $224 per ton

Quantities

Actual hours incurred and used 3,500 hours

Actual quantity of materials purchased and used 1,500 tons

Standard hours used 3,550 hours

Standard quantity of materials used 1,480 tons

Compute the total, price, and quantity variances for materials and labor.

Total materials variance

Materials price variance

Materials quantity variance

Total labor variance

Labor price variance

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Answers (1)
  1. 11 October, 14:58
    0
    Instructions are below.

    Explanation:

    Giving the following information:

    Direct labor:

    Actual labor rate $15 per hour

    Standard labor rate $14.50 per hour

    Actual hours incurred and used 3,500 hours

    Standard hours used 3,550 hours

    Direct material:

    Actual quantity of materials purchased and used 1,500 tons

    Standard quantity of materials used 1,480 tons

    Actual materials price $220 per ton

    Standard materials price $224 per ton

    To calculate the direct labor efficiency and rate variance, we need to use the following formulas:

    Direct labor time (efficiency) variance = (Standard Quantity - Actual Quantity) * standard rate

    Direct labor time (efficiency) variance = (3,550 - 3,500) 14.5

    Direct labor time (efficiency) variance = $725 favorable

    Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

    Direct labor rate variance = (14.5 - 15) * 3,500

    Direct labor rate variance = $1,750 unfavorable

    To calculate the direct material rate and quantity variance, we need to use the following formulas:

    Direct material price variance = (standard price - actual price) * actual quantity

    Direct material price variance = (224 - 220) * 1,500

    Direct material price variance = $6,000 favorable

    Direct material quantity variance = (standard quantity - actual quantity) * standard price

    Direct material quantity variance = (1,480 - 1,500) * 220

    Direct material quantity variance = $4,400 unfavorable
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