Question 5 – Standard Costs and Variance Analysis

STEFANO Company makes laptops, for which the following standards have been developed:

Direct Costs	Standard Inputs Expected for Each Unit of Output	Standard Price Expected per Unit of Output
Direct materials	2 kilograms	$4.5 per kilogram
Direct labour	2.5 hours	$22 per hour

During March, production of 200 laptops was expected, but 180 laptops were actually completed. Direct materials purchased and used were 400 kilograms at an actual price of $5 per kilogram. Direct labour cost for the month was $10,350, and the actual pay per hour was $25.00.

Instructions:

1. Compute the direct-material price variance for March.

2. Compute the direct-material quantity variance for the month of March.

3. Compute the direct-labour rate (price) variance for the month of March.
4. Compute the direct-labour efficiency (quantity) variance for the month of March.
5. What problems/issues would you report to STEFANO’s top management that relate to your findings in parts (a) to (d)?

Answer rating: 100% (QA)

A Material Price Variance is the difference between the Actual cost incurred and the standard cost o... View the full answer