PRICE VARIANCE

W Company

W Company has the following information available for March when 4,200 units were produced (round
answers to the nearest dollar).

Standards:
Material 4.0 pounds per unit @ $5.25 per pound
Labor 6.0 hours per unit @ $10.00 per hour

Actual:
Material purchased 17,500 pounds @ $5.10
Material used 16,700 pounds
25,500 direct labor hours @ $9.85 per hour

Refer to WCompany. What is the labor rate variance?

a. $3,780 F
b. $3,780 U
c. $3,825 F
d. $3,825 U
ANS: C
Labor Rate Variance = (AP - SP) * AQ
= ($9.85 - $10.00) * 25,500 hrs.
= $3,825 F

Refer to W Company. What is the labor efficiency variance?

a. $ 2,955 F
b. $ 2,955 U
c. $ 3,000 U
d. $ 3,000 F
PRICE VARIANCE

ANS: C
Labor efficiency variance = (AQ - SQ)* SP
=(25,500 hrs -(4,200 units * 6.0 hr/unit)) * $10.00/hr
= $3,000 U