Direct Material and labour variance analysis

Particulars
Standard unit and rate
Direct materials
Units 20 pounds
Rate 2 per pound
Direct labor
Hours 5 hrs
Rate 12 per hr

Units completed 6000 units

Materials purchased 150000 pounds
Cost of direct materials purchased 292500
Actual direct manf labor 32000 hrs
Actual direct labor cost 368000
Direct material efficiency variance 12500 Unfavorable

Required
1. Compute direct manf labor variance for July
2. Compute actual pounds of direct materials used in production
3. Calculate actual price per pound of direct materials purchased
4..Calculate the direct material price variance.
 Direct Material and labour variance analysis

1(a) Direct labor variance - Rate

Actual hrs worked (Actual rate - Budgeted rate)

Actual hrs worked 32,000.00

Actual rate 11.50

Budgeted rate 12.00

Rate variance 16,000.00 Favorable

(b) Direct labor variance - Efficiency

Budgeted rate 12.00

Actual hrs 32,000.00

Budgeted hrs 30,000.00

Efficiency variance 24,000.00 Unfavorable

2. Actual pounds of direct materials used in production

Material efficiency = Budgeted rate (Actual materials used - Budgeted Materials used )

Unfavorable direct material efficiency variance (Given) 12,500.00

Budgeted rate 2.00

Budgeted materials used 120,000.00

Actual materials used 126,250.00

3. Actual price per pound of direct materials purchased

Actual Material cost 292,500.00

Actual materials purchased 150,000.00

Actual price per pound of direct materials purchased 1.95

4. Direct material price variance

Actual materials purchased ( Actual price - St price)

Actual materials purchased 150,000.00

Scenario
Direct Material price and labour variance of Bovar Company

Standard costs for a company

Per unit Per lbs
Direct materials 15.00 5 3
Direct Manf labor 10.00 20 0.5
Manf OH 7.50

Following details are obtained from bovars records

Debit Credit
Accts payable 125000
Purchase of dm 68250
DM price variance 3250
DM Efficiency variance 2500
Direct manufacturing 1900
Direct manufacturing labor efficiency variance 2000

Actual production in May was 4000

Actual sales 2500
There was no beginning or ending inventory

Required
1. Standard direct manf labour hrs allowed for actual output
2. Actual direct manf labor hrs
3. Actual direct manf labor wage rate
4. St quantity of direct materials allowed
5. Actual quantity of direct material used
6. Actual quantity of direct material purchased
7. Actual direct material price per pound
 Direct Material price and labour variance of Bovar Company

1. Standard direct manf hrs allowed for actual output

Actual output 4000.00
Standard hrs 0.50
Standard direct manf hrs allowed for actual output 2,000.00

2. Actual direct manf labor hrs

Labor efficiency variance
Budgeted rate (Actual direct labor hrs - budgeted direct labor hrs)

Labor efficiency variance favorable (Given) 2,000.00

Budgeted rate 20.00
Budgeted direct labor hrs 2,000.00
Actual direct manf labor hrs 1900.00

3. Actual Manufacturing wage rate

Labor rate variance
Actual hrs worked (Actual rate-Budgeted rate )
Labor rate variance Unfavorable (Given) 1900.00
Actual hrs worked 1900.00
Budgeted rate 20.00
Actual rate 21.00

4. Standard quantity of direct materials allowed

Standard quantity allowed per output 3.00
Output 4000.00
Standard quantity of direct materials allowed 12000.00

5. Actual quantity of direct materials used

Direct material efficiency variance
Budgeted rate (Actual units used - standard units used)
Direct material efficiency variance unfavorable (Given 2500.00
Budgeted rate 5.00
Standard quantity of materials used 12000.00
Actual units used 12500.00

6. Actual quantity of direct materials purchased

Material price variance
 Actual quantity purchased (Actual price - Budgeted price)
Material price variance - Unfavorable (Given) 3250.00
Purchase of direct materials 68250.00
Budgeted price 5.00
Actual quantity of direct materials purchased 1 3000.00

7. Actual direct material price per pound

Actual quantity of direct materials purchased 13000.00
Purchase cost 68250.00
Actual direct material price per pound 5.25
 Sales price and Direct material & labor cost variance analysis of
Aunt Mollys Old Fashioned Cookies

Cost item Qty per St unit costs

pound of
cookies Sales
price
Direct material and
Cookie mix 10 0.02 Direct
Milk Chocolate 5 0.15 material
Almonds 1 0.50 & labor
Direct manf Mts cost
labor variance
Mixing 1 14.40 analysis
Baking 2 18.00 of
Variable 8 32.40
overhead

Perfomance report April 2007

Particulars Actual Budget Variance

Units 450000 400000 50000 Favorable
Revenues 3,555,000.00 3,200,000.00 355,000.00 Favorable
Direct materials 865,000.00 580,000.00 285,000.00 Unfavorable
Direct manf labor 348,000.00 336,000.00 12,000.00 Unfavorable

Usage report

Cost item Qty Actual cost

Direct materials
Cookie mix 4,650,000.00 93,000.00
Milk Chocolate 2,660,000.00 532,000.00
Almonds 480000.00 240,000.00

Direct manf labor

Mixing 450,000.00 108,000.00

Baking 800,000.00 240,000.00

Required
1. Sales price variance
2. Direct material price variance
3. Direct material efficiency variance
4. Direct labor efficiency variance
 Aunt Mollys Old Fashioned Cookies

1. Sales price variance

Saled price variance
Actual quantity sold (Actual selling price - Budgeted selling price)

Actual quantity sold 450000

Actual selling price 7.90
Budgeted selling price 8.00
Sales price variance (45,000.00) Unfavorable

2. Direct material price variance

Actual quantity purchased (Actual price - Budgeted price)

Cost item Actual quty Actual quty Unfavorable/

Purchased * purchased* (favorable variance)
Actual price budgeted price

Cookie milk 93,000.00 93,000.00 -

Milk Chocolate 532,000.00 399,000.00 133,000.00
Almond 240,000.00 240,000.00 -

3. Direct material efficiency variance

Budgeted rate (Actual qty used - Budgeted qty used)

Cost item Budgeted rate * Budgeted rate * Unfavorable/

actual quty used budgeted qty used (favorable variance)

Cookie mix 93,000.00 90,000.00 3,000.00

Milk Chocolate 399,000.00 337,500.00 61,500.00
Almond 240,000.00 225,000.00 15,000.00

       
4. Direct labor efficiency variance
Budgeted labor rate (Actual labor hrs - Budgeted labor hrs)

Cost item Budgeted labor Budgeted labor Unfavorable/

rate * Actual rate * budgeted (favorable variance)
labor hrs labor rate

Mixing 108,000.00 108,000.00 -

Baking 240,000.00 270,000.00 (30,000.00)

Sales price and direct material & labor cost variance analysis of
 Horizon Limited
Scenario

Particulars Actual results Static Budget

Units sold 4,850 5,000
Revenues 397,700.00 400,000.00
Variable Manf costs 234,643.00 216,000.00
Fixed Manf costs 72,265.00 75,000.00
Gross Margin 90,792.00 109,000.00

Additional details
Standard cost
Lenses Frames
Standard input 6 Ounces per unit Standard input 3 Ounces per unit
Direct materials 33,000.00 Direct materials 93,000.00

Actuals

Lenses Frames
Direct materials 37,248.00 100,492.00
Standard input 3.20 7.00
Labour
Actual Direct labour 96,908.00
Actual labor rate 14.80
Direct manf labor 90,000.00
Standard input 1.2 hrs per unit

Required
1. Selling price variance
2. Sales volume variance
3. Flexible budget variance in level 2 analysis
4. Price and efficiency variance
a) Direct material frames
b) Direct material lenses
5. Direct manf labour
a) Rate variance
b) Efficiency variance
 Sales price and direct material & labor cost variance analysis of
Horizon Limited
1. Selling price variance

Actual quantity sold * (Actual selling price - budgeted selling price)

Actual quantity sold 4,850.00

Actual selling price 82.00
Budgeted selling price 80.00

Selling price variance 9,700.00 favorable

2. Sales volume variance

Budgeted selling price *(Actual quantity sold - budgeted quantity sold)

Budgeted selling price 80.00

Actual quantity sold 4,850.00
Budgeted quantity sold 5,000.00
Sales volume variance (12,000.00) Unfavorable

3. Flexible budget in level 2 analysis

Static budget variance = Flexible budget variance + sales volume variance

Flexible budget variance

Actual gross margin - flexible gross margin

Actual gross margin 90,792.00

Flexible budget gross margin 103,480.00
Flexible budget variance (12,688.00) Unfavorable

Sales volume variance

Flexible gross margin - static budget margin
Flexible gross margin -
static budget margin

Flexible budget gross margin 103,480.00

Static budget gross margin 109,000.00
Sales volume variance (5,520.00) Unfavorable

4(a) Price and efficiency variance of direct material - Frames

Price variance - Frames

Actual quantity purchased (Actual price - Budgeted price)
Actual quantity input 15,520.00
Actual price 2.40
Budgeted price 2.20
Price variance - Frames 3,104.00 Unfavorable

Efficiency variance - Frames

Budgeted price (Actual quantity used - budgeted quantity used)
 Actual quantity used 15,520.00
Budgeted quantity used 14,550.00
Budgeted price 2.20
Efficiency variance - Frames 2,134.00 Unfavorable

Sales price and direct material & labor cost variance analysis of
Horizon Limited

4(b) Price and efficiency variance of direct material – Lenses

Price variance - Lenses

Actual quantity purchased (Actual price - Budgeted price)
Actual quantity input 33,950.00
Actual price 2.96
Budgeted price 3.10
Price variance - Lenses (4,753.00) Favorable

Efficiency variance - Lenses

Budgeted price (Actual quantity used - budgeted quantity used)

Actual quantity used 33,950.00

Budgeted quantity used 29,100.00
Budgeted price 3.10
Efficiency variance –Lenses (15,035.00) Unfavorable

5. Rate and efficiency variance- Direct Manf labor

(a) Rate variance
Actual labor hrs ( Actual labor rate - Budgeted labor rate)

Actual labor hrs 6547.84

Actual labor rate 14.80
Standard labor rate 15.00
Rate variance (1,309.57) Favorable

(b) Efficiency variance - Direct manf labor

Budgeted labor rate (Actual labor hrs - budgeted labor hrs)

Budgeted rate 15.00

Actual hrs 6,547.84
Budgeted direct labor hrs 5,820.00
Efficiency variance (10,917.57) Unfavorable