Swifty Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (6 pounds at $1.60 per pound) $9.60
Direct labor (3 hours at $11.00 per hour) $33.00

During the month of April, the company manufactures 180 units and incurs the following actual costs.

Direct materials purchased and used (2,400 pounds) $4,320
Direct labor (560 hours) $6,048

Required:
Compute the total, price, and quantity variances for materials and labor.

Results are below.

Explanation:

First, we will determine the direct material price, quantity, and total variance. We need to use the following formulas:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (1.6 - 1.8)*2,400

Direct material price variance= $460 unfavorable

Actual price= 4,320/2,400= $1.8

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (6*180 - 2,400)*1.6

Direct material quantity variance= $2,112 unfavorable

Total variance= 460 + 2,112= $2,572 unfavorable

To calculate the direct labor rate, efficiency, and total variance. We need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (3*180 - 560)*11

Direct labor time (efficiency) variance= $220 unfavorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (11 - 10.8)*560

Direct labor rate variance= $112 favorable

Actual rate= 6,048/560= $10.8

Total variance= -220 + 112= $108 unfavorable

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