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Calculate the material and labor variances for table production based on the provided standard and actual costs.

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Here are the calculations for the material and labor variances for table production.

Data Extraction:

Standard Cost per Table:

  • Iroko: 12 kg @ N5.60/kg = N67.20
  • Polish: 0.5 liter @ N6.00/liter = N3.00
  • Labor: 16 hours @ N12.00/hour = N192.00

Actual Production and Costs (August 2006):

  • Tables produced: 1,240 units
  • Iroko: 900 kg purchased and used for N22,500
  • Polish: 500 liters purchased and used for N2,000
  • Labor: 10,400 hours worked for N72,500

1. Material Price Variance (MPV)
Formula: MPV=(Standard Price−Actual Price)×Actual Quantity PurchasedMPV = (Standard\ Price - Actual\ Price) \times Actual\ Quantity\ Purchased

  • a) Iroko Material Price Variance

  1. Calculate Actual Price (AP) for Iroko.

    $$
\text{AP (Iroko)} = \frac{\text{Actual Cost}}{\text{Actual Quantity}} = \frac{\text{N}22,500}{900 \text{ kg}} = \text{N}25.00/\text{kg}
$$

  2. Calculate Iroko Material Price Variance.

    $$
\text{MPV (Iroko)} = (\text{N}5.60 - \text{N}25.00) \times 900 \text{ kg} = (-\text{N}19.40) \times 900 \text{ kg} = -\text{N}17,460
$$
The variance is adverse because the actual price was higher than the standard price.
*   **Iroko Material Price Variance: N17,460 Adverse**
    • b) Polish Material Price Variance

  3. Calculate Actual Price (AP) for Polish.

    $$
\text{AP (Polish)} = \frac{\text{Actual Cost}}{\text{Actual Quantity}} = \frac{\text{N}2,000}{500 \text{ liters}} = \text{N}4.00/\text{liter}
$$

  4. Calculate Polish Material Price Variance.

    $$
\text{MPV (Polish)} = (\text{N}6.00 - \text{N}4.00) \times 500 \text{ liters} = (\text{N}2.00) \times 500 \text{ liters} = \text{N}1,000
$$
The variance is favorable because the actual price was lower than the standard price.
*   **Polish Material Price Variance: N1,000 Favorable**

    2. Material Usage Variance (MUV)
    Formula: MUV=(Standard Quantity−Actual Quantity Used)×Standard PriceMUV = (Standard\ Quantity - Actual\ Quantity\ Used) \times Standard\ Price

    • a) Iroko Material Usage Variance

  5. Calculate Standard Quantity (SQ) for actual production.

    $$
\text{SQ (Iroko)} = 12 \text{ kg/table} \times 1,240 \text{ tables} = 14,880 \text{ kg}
$$

  6. Calculate Iroko Material Usage Variance.

    $$
\text{MUV (Iroko)} = (14,880 \text{ kg} - 900 \text{ kg}) \times \text{N}5.60/\text{kg} = (13,980 \text{ kg}) \times \text{N}5.60/\text{kg} = \text{N}78,288
$$
The variance is favorable because less material was used than the standard quantity for the actual production.
*   **Iroko Material Usage Variance: N78,288 Favorable**
    • b) Polish Material Usage Variance

  7. Calculate Standard Quantity (SQ) for actual production.

    $$
\text{SQ (Polish)} = 0.5 \text{ liter/table} \times 1,240 \text{ tables} = 620 \text{ liters}
$$

  8. Calculate Polish Material Usage Variance.

    $$
\text{MUV (Polish)} = (620 \text{ liters} - 500 \text{ liters}) \times \text{N}6.00/\text{liter} = (120 \text{ liters}) \times \text{N}6.00/\text{liter} = \text{N}720
$$
The variance is favorable because less material was used than the standard quantity for the actual production.
*   **Polish Material Usage Variance: N720 Favorable**

    3. Labor Rate Variance (LRV)
    Formula: LRV=(Standard Rate−Actual Rate)×Actual Hours WorkedLRV = (Standard\ Rate - Actual\ Rate) \times Actual\ Hours\ Worked

  9. Calculate Actual Rate (AR).

    AR=Actual Labor CostActual Hours Worked=N72,50010,400 hours≈N6.97115/hour\text{AR} = \frac{\text{Actual Labor Cost}}{\text{Actual Hours Worked}} = \frac{\text{N}72,500}{10,400 \text{ hours}} \approx \text{N}6.97115/\text{hour}

  10. Calculate Labor Rate Variance.

    LRV=(N12.00−N6.97115)×10,400 hours=(N5.02885)×10,400 hours=N52,300\text{LRV} = (\text{N}12.00 - \text{N}6.97115) \times 10,400 \text{ hours} = (\text{N}5.02885) \times 10,400 \text{ hours} = \text{N}52,300

    The variance is favorable because the actual labor rate was lower than the standard rate.

    • Labor Rate Variance: N52,300 Favorable

    4. Labor Efficiency Variance (LEV)
    Formula: LEV=(Standard Hours−Actual Hours Worked)×Standard RateLEV = (Standard\ Hours - Actual\ Hours\ Worked) \times Standard\ Rate

  11. Calculate Standard Hours (SH) for actual production.

    SH=16 hours/table×1,240 tables=19,840 hours\text{SH} = 16 \text{ hours/table} \times 1,240 \text{ tables} = 19,840 \text{ hours}

  12. Calculate Labor Efficiency Variance.

    LEV=(19,840 hours−10,400 hours)×N12.00/hour=(9,440 hours)×N12.00/hour=N113,280\text{LEV} = (19,840 \text{ hours} - 10,400 \text{ hours}) \times \text{N}12.00/\text{hour} = (9,440 \text{ hours}) \times \text{N}12.00/\text{hour} = \text{N}113,280

    The variance is favorable because fewer hours were worked than the standard hours for the actual production.

    • **Labor Efficiency Variance: N113,280
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