Black and Digger's Manufactures Hedgers Black and Digger's Actually Used 53,000 Units of Direct Materials

question 98

Essay

Black and Digger's manufactures hedgers.During the year,it manufactured 5,000 hedgers,using 4.2 hours of direct labour per hedger at a rate of $8 per hour.The materials and labour standards for manufacturing the hedgers are as follows: $\begin{array}{lr}\text { Direct materials (10 units } @ \$ 2 \text { per unit) } & \$ 20 \\\text { Direct labour ( } 4 \text { hours } @ \$ 7.50 \text { per hour) } & 30\end{array}$ Black and Digger's actually used 53,000 units of direct materials at a price of $2.25 per unit.
Required: A. Determine the materials price variance and whether it is favourable or unfavourable.
B. Determine the materials usage variance and whether it is favourable or unfavourable.
C. Determine the labour rate variance and whether it is favourable or unfavourable.
D. Determine the labour efficiency variance and whether it is favourable or unfavourable.

---

Definitions:

Deferred Tax Liability

This is a tax obligation due in the future for income that has already been recognized in the financial statements.

Carrying Values

The book value of assets and liabilities as reported on the balance sheet, accounting for depreciation, amortization, and impairment.

Fair Values

The estimated price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Tax Bases

The amount upon which taxes are assessed, including income, property values, or sales, providing a foundation for tax calculations.