The following direct materials and direct labor data pertain to the operations of Solario Manufacturing Company for the month of August
Costs
Quantities
Actual labor rate $13 per hour Actual hours incurred and used 4,200 hours
Actual materials price $128 per ton Actual quantity of materials purchases and used 1,225 tons
Standard labor rate $12 per hour Standard hours used 4,300 hours
Standard materials price $130 per ton Standard quantity of materials used 1,200 tons
Compute the total, price, and quantity variances for materials and labor.
Total materials variance $ UnfavorableFavorable
Materials price variance $ FavorableUnfavorable
Materials quantity variance $ UnfavorableFavorable
Total labor variance $ FavorableUnfavorable
Labor price variance $ UnfavorableFavorable
Labor quantity variance $ UnfavorableFavorable
To compute the total, price, and quantity variances for materials and labor, you need to understand the formulas used to calculate these variances.
For materials:
1. Total Materials Variance: This is the overall difference between the actual costs and standard costs of materials used.
Formula: Total Materials Variance = (Actual Quantity of Materials Used x Actual Price) - (Standard Quantity of Materials Used x Standard Price)
2. Materials Price Variance: This measures the difference between the actual price paid for materials and the standard price.
Formula: Materials Price Variance = (Actual Quantity of Materials Used x Actual Price) - (Actual Quantity of Materials Used x Standard Price)
3. Materials Quantity Variance: This measures the difference between the actual quantity of materials used and the standard quantity.
Formula: Materials Quantity Variance = (Standard Quantity of Materials Used x Standard Price) - (Actual Quantity of Materials Used x Standard Price)
For labor:
1. Total Labor Variance: This is the overall difference between the actual labor costs and standard labor costs incurred.
Formula: Total Labor Variance = (Actual Hours x Actual Rate) - (Standard Hours x Standard Rate)
2. Labor Price Variance: This measures the difference between the actual labor rate paid and the standard labor rate.
Formula: Labor Price Variance = (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate)
3. Labor Quantity Variance: This measures the difference between the actual hours worked and the standard hours.
Formula: Labor Quantity Variance = (Standard Hours x Standard Rate) - (Actual Hours x Standard Rate)
Now, let's calculate the variances:
Materials:
Total Materials Variance = (1,225 tons x $128/ton) - (1,200 tons x $130/ton)
Materials Price Variance = (1,225 tons x $128/ton) - (1,225 tons x $130/ton)
Materials Quantity Variance = (1,200 tons x $130/ton) - (1,225 tons x $130/ton)
Labor:
Total Labor Variance = (4,200 hours x $13/hour) - (4,300 hours x $12/hour)
Labor Price Variance = (4,200 hours x $13/hour) - (4,200 hours x $12/hour)
Labor Quantity Variance = (4,300 hours x $12/hour) - (4,200 hours x $12/hour)
Once you plug in the values and calculate the equations, you will get the amounts for each variance.