Concept explainers
Calculation of materials and labor variances
Fritz Corp. manufactures and sells a single product. The company uses a
The charges to the manufacturing department for November, when 5,000 units were produced, follow:
The Purchasing department normally buys about the same quantity as is used in production during a month. In November, 5,500 lb were purchased at a price of $2.90 per pound.
Required:
Calculate the following from standard costs for the data given, using the formulas on pages 421–422 and 424:
- 1. Materials quantity variance.
- 2. Materials purchase price variance (at time of purchase).
- 3. Labor efficiency variance.
- 4. Labor rate variance.
- 5. Give some reasons as to why both the materials quantity variance and labor efficiency variance might be unfavorable.
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