Question:
Materials and Labor Variance Analyses
Cabrera Chemical Company
Cabrera Chemical Company manufactures one product and uses a standard cost system. The established standards for materials and labor follow:
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Material A: 3 lb @$6 per lb
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$18
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Labor: 4 hr@$750 per hr
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30
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The operating data for the month of May follow: Work in process, May 1: 200 units, all materials, 20% complete as to labor. Work in process, May 31: 600 units, all materials, 80% complete as to labor. Completed during the month: 6,400 units. All materials are added at the beginning of processing in the department. 20,900 pounds of materials were used in production during the month, at a total cost of $123,310. Direct labor amounted to $208,670, which was at a rate of $7.70 per hour
Required:
Using the FIFO method of costing, calculate the following variances:
1. Materials quantity variance.
2. Materials price variance.
3. Labor efficiency variance.
4. Labor rate variance.