Labor hours at standard | Labor dollars at standard | Labor cost variance | |
Balance, March 1 | 5,000 | $25,000 | $2,000 |
Additions in March | 15,000 | 75,000 | 5,000 |
Total | 20,000 | 100,000 | 7,000 |
Transfers-out in March | 8,000 | 40,000 | |
Balance, March 31 | 12,000 | 60,000 |
Using labor hours at standard as the base, Contractor C establishes a labor-cost variance rate of $.35 per standard labor hour ($7,000 ÷ 20,000), and deducts $2,800 ($.35 * 8,000) from the labor-cost variance account, leaving a balance of $4,200 ($7,000-$2,800). Contractor C's practice complies with provisions of 9904.407-50(d)(1) of this Cost Accounting Standard.
Material cost at standard | Material price variance | |
Inventory, May 1 | $150,000 | $20,000 |
Additions in May | 1,850,000 | 120,000 |
Total | 2,000,000 | 140,000 |
Requisitions: | ||
Production Unit 1 | 900,000 | |
Production Unit 2 | 450,000 | |
Production Unit 3 | 300,000 | |
Production Unit 4 | 150,000 | |
Inventory, May 31 | 200,000 |
Material cost at standard | Material price variance rate (%) | Material price variance allocation | |
Production Unit 1 | $900,000 | 7 | $63,000 |
Production Unit 2 | 450,000 | 7 | 31,500 |
Production Unit 3 | 300,000 | 7 | 21,000 |
Production Unit 4 | 150,000 | 7 | 10,500 |
Ending inventory of homogeneous grouping of material | 200,000 | 7 | 14,000 |
Total | 2,000,000 | 140,000 |
Contractor E's practice complies with provisions of 9904.407-50(b)(3)(ii) of this Cost Accounting Standard.
Production unit | Total units of output | Total units used by the covered contract | Total labor costs at standard | Total labor-cost variance |
1 | 100,000 | 10,000 | $400,000 | $20,000 |
2 | 30,000 | 6,000 | 900,000 | 30,000 |
3 | 20,000 | 5,000 | 600,000 | 10,000 |
4 | 10,000 | 4,000 | 500,000 | 20,000 |
Labor-cost variance per unit of unit | Units used by the covered contract | Labor-cost variance attributable to the covered contract | |
Production Unit 1 | $0.20 | 10,000 | $2,000 |
Production Unit 2 | 1.00 | 6.000 | 6.000 |
Production Unit 3 | .50 | 5,000 | 2,500 |
Production Unit 4 | 2.00 | 4,000 | 8,000 |
Total labor-cost variance attributable to the covered contract | 18,500 |
48 C.F.R. §§9904.407-60