Stephaney Company produces several products in its factory, including a karate r

Question

Stephaney Company produces several products in its factory, including a karate robe. The company uses a standard cost system to assist in the control of costs. According to the standards that have been set for the robes, the factory should work 780 direct labor-hours each month and produce 3,900 robes. The standard costs associated with this level of production are as follows:

Variable manufacturing overhead
(based on direct labor-hours)

$ 22.90

During April, the factory worked only 750 direct labor-hours and produced 4,000 robes. The following actual costs were recorded during the month:

Variable manufacturing overhead

At standard, each robe should require 3.0 yards of material. All of the materials purchased during the month were used in production.

Compute the materials price and quantity variances for April: (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar amount.)

Compute the labor rate and efficiency variances for April: (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar amount.)

Compute the variable manufacturing overhead rate and efficiency variances for April: (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar amount.)

Total Per Unit
of Product Direct materials $ 73,710 $ 18.90 Direct labor $ 13,260 3.40

Variable manufacturing overhead
(based on direct labor-hours)

$ 2,340 0.60

$ 22.90

Explanation / Answer

Each robe should require 3.0 yards of material.

Standard price per yard = 18.9/3 = $6.30

(1)

SQ: Standard Quantity for actual output

SP: Standard Price

AQ: Actual Quantity for actual output

AP: Actual price

Material price variance = AQSP - AQAP = 12400 x 6.30 - 74400 = $3720 Favorable

Material quantity variance = SQSP - AQSP = 4000 x 18.9 - 12400 x 6.3 = $2520 Unfavorable

(2)

SH: Standard Hour for actual output

SR: Standard rate

AH: Actual Hour for actual output

AR: Actual rate

Standard rate for labor = $13260/780 = $17

Labor rate variance =AHSR - AHAR = 750 x 17 - 14400 = $1650 Unfavorable

Labor Efficiency variance = SHSR - AHSR = 4000 x 3.4 - 750 x 17 = $850 Favorable

(3)

SH: Standard Hour for actual output

SR: Standard rate

AH: Actual Hour for actual output

AR: Actual rate

Standard rate for overhead = 2340/780 = $3 per labor hour

Variable overhead rate variance = AHSR - AHAR = 750 x 3 - 8000 = $5750 Unfavorable

Variable overhead efficiency variance = SHSR - AHSR = 4000 x 0.6 - 750 x 3 = $150 Favorable

Hope this helps!

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