Standard Cost System-Materials and Labor Variances
the Hemlock Corporation Produces

question 95

Essay

Standard cost system-materials and labor variances
The Hemlock Corporation produces a single product. The company has developed the following standards for labor and materials:
During the past month, the company purchased 3,500 pounds of direct materials at a total cost of $4,550. All of this material was used in the production of 1,300 units of output. Direct labor cost totaled $40,300 for the month. The following variances have been computed:
Compute the following. If the result is a variance indicate whether it is favorable or unfavorable.
(a) The standard price of materials. _________________.
(b) The standard quantity of materials allowed per unit of output _________.
(c) The actual direct labor cost per hour for the month. _____________.
(d) The labor rate variance. ______________________.
$\begin{array}{l|l|l|}\hline &\text { Direct } & \text { Direct } \\\hline &\text { Materials } & \text { Labor } \\\hline \text { Standard quantity or hours per unit } & \text { ? pounds per unit } & 2.0 \text { hours per unit } \\\hline \text { Standard price or rate } & \text { ? per pound } & \$ 15 \text { per hour } \\\hline \text { Standard cost per unit } & ? & \$ 30.00\\\hline\end{array}$ $$\begin{array} { | l | l | } \hline \text { Materials quantity variance } & \$ 670 \text { unfavorable } \\\hline \text { Total materials variance } & \$ 325 \text { favorable } \\\hline \text { Labor efficiency variance } & \$ 3,475 \text { favorable } \\\hline\end{array}$$

---

Definitions:

Markdown

A reduction from the original or retail price of a good or service to increase its attractiveness to buyers.

Operating Expenses

Expenses related to the routine functioning of a company, not including the expenses of products sold.

Operating Profit

Profit earned from a firm's core business operations, excluding deductions of interest and tax.

Potted Poinsettias

A common household plant, particularly popular during the holiday season, characterized by its red and green foliage.