High Tech Builds Fence Panels to Custom Order

question 85

Essay

High Tech builds fence panels to custom order. Materials include 15 units of lumber at $2.25 per unit. Standards call for 3 hours of labor at $25 per hour.
During October, 3,121 fence panels were built. Materials purchased totaled $113,650 for 51,100 units of lumber. Actual lumber usage in production was 51,069 units. The October payroll was $248,000 for 9,500 hours.
Required:
(Be sure to indicate whether the variance is favorable or unfavorable.)
a. Compute the direct material price variance.
b. Compute the direct material efficiency variance.
c. Compute the direct labor rate variance.
d. Compute the direct labor efficiency variance.

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Definitions:

Equipment

Tangible property used in the operations of a business, such as machinery and tools, which are not intended for sale.

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows funds, used as a benchmark in lease agreements to calculate the present value of minimum lease payments.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.

Liability

Financial obligations or debts owed by a business to others, which must be settled over time through the transfer of economic benefits.