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20 January, 18:39

Valport Valve Company manufactured 7,800 units during March of a control valve used by milk processors in its Shreveport plant. Records indicated the following:

Direct labor 40,200 hr. at $14.60

Direct material purchased 30,000 lb. at $3.00

Direct material used 22,100 lb.

The control valve has the following standard prime costs.

Direct material: 3 lb. at $2.90 per lb. $ 8.70

Direct labor: 5 hr. at $15.10 per hr. 75.50

Standard prime cost per unit $ 84.20

Required:

1. Prepare a schedule of standard production costs for March, based on actual production of 7,800 units.

2. For the month of March, compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i. e., zero variance).)

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Answers (1)
  1. 20 January, 18:48
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production = 7,800 units

    Direct labor 40,200 hr. at $14.60

    Direct material purchased 30,000 lb. at $3.00

    Direct material used 22,100 lb.

    The control valve has the following standard prime costs.

    Direct material: 3 lb. at $2.90 per lb. $ 8.70

    Direct labor: 5 hr. at $15.10 per hr. 75.50

    Standard prime cost per unit $ 84.20

    1) Standard production costs:

    Direct material = 8.7*7,800 = 67,860

    Direct labor = 75.5*7,800 = 588,900

    Total porduction cost = $656,760

    2) We need to use the following formulas to calculate the direct material and direct labor variances:

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

    Direct material price variance = (2.9 - 3) * 30,000

    Direct material price variance = $3,000 unfavorable

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

    Direct material quantity variance = (3*7,800 - 22,100) * 15.1

    Direct material quantity variance = (23,400 - 22,100) * 2.9

    Direct material quantity variance = $3,770 favorable

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

    Direct labor time (efficiency) variance = (5*7,800 - 40,200) * 15.1

    Direct labor time (efficiency) variance = $18,120 unfavorable

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

    Direct labor rate variance = (15.1 - 14.6) * 40,200

    Direct labor rate variance = $20,100 favorable
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