Compute a separate variance between actual and standard cost for direct material, direct labor, and…

(Standard costing) Modern Convenience specializes in making robotic conveyor systems to move materials within a factory. Model #89 accounts for approximately 60 percent of the company’s annual sales. Because the company has produced and expects to continue to produce a significant quantity of this model, Modern Convenience uses the following standard costs to account for Model #89 production

Direct material (28,000 pounds)

$ 56,000

Direct labor (1,720 hours at $20 per hour)

34,400

Overhead

76,000

Total standard cost

$166,400

For the 200 units of Model #89 produced in 2010, the actual costs were

Direct material (6,000,000 pounds)

$11,600,000

Direct labor (178,400 hours)

6,957,600

Overhead

14,800,000

Total actual cost

$33,357,600

a. Compute a separate variance between actual and standard cost for direct material, direct labor, and manufacturing overhead for the Model #89 units produced in 2010.

b. Is the direct material variance found in (a) driven primarily by the price per pound difference between standard and actual or the quantity difference between standard and actual? Explain.

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