Camping Supply Company has developed a new camping lamp that runs on solar power. The solar cells charge in the sun all day and then the lamp is ready to run when the sun goes down. The company has a standard costing system to help control costs and has established the following standards related to the new camping lamp:
Direct materials: 3 small solar cells per lamp at $0.60 per cell
Direct labour: 0.75 hours per lamp at $12 per hour
During March, the company produced 4,000 camping lights. Production data for March are as follows:
Direct materials: 20,000 small solar cells were purchased at a cost of $0.65 per cell; 6,000 of these were still in inventory at the end of the month (there was no opening inventory).
Direct labour: 3,100 direct labour-hours were worked at a cost of $35,000.
Required:
1. Compute the direct materials price and quantity variances for March. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i. e., zero variance).)
2. Compute the direct labour rate and efficiency variances for March.(Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i. e., zero variance).)

Variance analysis is the measurement tool that determines the gap between the actual and the budgeted or the standard figures determined by the management as per the past records.

1.

2.

Computation:

1.

Given:

Working Note:

Computation of Actual Quantity used:

2.

Given:

Working note:

Computation of standard hour:

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1. $1,000 Unfavorable

2. $1,200 Unfavorable

3. $2,200 Favorable

4. $1,200 Unfavorable

Explanation:

Actual Quantity purchased = 20,000

Actual price per cell = $0.65

Standard Price per cell = $0.60

Direct Materials Price Variance = Actual Quantity Purchased × (Actual Price - Standard Price)

= 20,000 × ($0.65 - $0.60)

= $1,000 Unfavorable

Standard Price per cell = $0.60

Actual Quantity used = Actual quantity purchased - Ending inventory

= 20,000 - 6,000

= 14,000

Standard Quantity = 3 × 4,000

= 12,000

Direct Materials Quantity Variance = Standard Price × (Actual Quantity Used - Standard Quantity)

= $0.60 × (14,000 - 12,000)

= $1,200 Unfavorable

2.  Actual hours = 3,100

Actual Direct labor cost = $35,000

Standard Rate = $12 per hour

Direct Labor Rate Variance = Actual Direct labor cost - Actual Hours × Standard Rate

Direct Labor Rate Variance

= $35,000 - 3,100 × $12

= $2,200 Favorable

Standard Rate = $12.00 per hour

Standard hours = 0.75 × 4,000

= 3,000

Actual hours = 3,100

Direct Labor Efficiency Variance = Standard Rate × (Actual hours - Standard hours)

= $12.00 × (3,100 - 3,000)

= $1,200 Unfavorable

the answer is true

for e2020 ; -;