Question

Standard Costs: Budgeted units of production - 16,000 [80% (or normal) capacity] Standard labor hours per unit - 4 Standard labor rate - $26 per hour Standard material per unit - 8 lbs. Standard material cost - $12 per pound Standard variable overhead rate - $15 per labor hour Budgeted fixed overhead - $640,000 Fixed overhead rate is based on budgeted labor hours at 80% (or normal) capacity. Actual Cost: Actual production - 16,500 units Actual material purchased and used - 130,000 pounds Actual total material cost - $1,600,000 Actual labor - 65,000 hours Actual total labor costs - $1,700,000 Actual variable overhead - $1,000,000 Actual fixed overhead - $640,000
Determine: (a) the quantity variance, price variance, and total direct materials cost variance; (b) the time variance, rate variance, and total direct labor cost variance; and (c) the volume variance, controllable variance, and total factory overhead cost variance.

Answer 1

Answer:

DIRECT MATERIALS VARIANCES

price variance  $(40,000.00)

quantity variance  $3,000.00

DIRECT LABOR VARIANCES

rate variance  $(10,000.00)

efficiency variance  $21,000.00

Explanation:

DIRECT MATERIALS VARIANCES

$(standard\:cost-actual\:cost) \times actual \: quantity= DM \: price \: variance$

std cost  $12.00

actual cost  $12.31  ($1,600,000 actual cost/ 130,000 pounds)

quantity 130,000

difference  $(0.31)

price variance  $(40,000.00)

$(standard\:quantity-actual\:quantity) \times standard \: cost = DM \: quantity \: variance$

std quantity 132000.00 (16,500 units x 8 pounds per unit)

actual quantity 130000.00

std cost  $1.50

difference 2000.00

quantity variance  $3,000.00

DIRECT LABOR VARIANCES

$(standard\:rate-actual\:rate) \times actual \: hours = DL \: rate \: variance$

std rate  $26.00

actual rate  $26.15 ($1,700,000 / 65,000 ACTUAL HOURS)

actual hours 65,000

difference  $(0.15)

rate variance  $(10,000.00)

$(standard\:hours-actual\:hours) \times standard \: rate = DL \: efficiency \: variance$

std  hours 66000.00 ( 4 hours per uniot X 16,500 units)

actual hours 65000.00

std rate  $21.00

difference 1000.00

efficiency variance  $21,000.00