Olson Company developed the following standard costs for its product:
Unit Standard Cost
Direct Materials (5 pounds @ $4 per pound) $20
Direct Labor (4 hours @ $8 per hour) 32
The company planned to work 200,000 direct labor hours and produce 50,000 units of product in 2014.
Actual results for 2014 are as follows:
48,000 units of product were produced.
Actual direct materials purchased and used during the year amounted to 244,000 pounds at a cost of $951,600.
Actual direct labor costs were $1,558,000 for 190,000 direct labor hours worked.
Instructions
Calculate the following variances showing all computations supporting your answers. Indicate if the variances are favorable (F) or unfavorable (U).
(a) Direct materials price and direct materials quantity variances.
(b) Direct labor price and direct labor quantity variances.