Problem : Vinbit Manufactured by Starr Company

The Starr Company has established a standard cost system for the manufacture of a single consumer product, which is branded under the name Vinbit. The standard costs of producing one Vinbit are shown below:

Standard Cost Card:

Direct Materials: 20 pounds @ $.30                                         $6.00

Direct Labor: 3 hours @ $15.00                                             $45.00

At the beginning of the year, Starr Company established a monthly flexible overhead budget as follows:

Flexible Overhead Budget:

Variable Charges - $.60 per direct labor hour

Fixed Charges - $5,000.00 per month

Budgeted Volume – 10,000 direct labor hours      

The costs of operations to produce 4,500 Vinbits during May are stated below (there were no initial inventories):

            Actual Costs:

            Materials purchased: 110,000 pounds @ $.31                    $34,100

            Materials used: 105,000 pounds

            Direct Labor: 13,750 hours @ $15.20                                 $209,000

            Variable overhead incurred                                                     $8,500

            Fixed overhead incurred                                                          $6,000

Required:

Prepare a calculation of the direct material price and quantity variances for the month of May. All variances should be calculated as soon as possible.

Prepare a calculation of the direct labor wage rate and efficiency variances for the month of May.