Leerar Corporation makes a product with the following standard costs: ..........

Question

Leerar Corporation makes a product with the following standard costs:

................................................Standard Quantity or Hours........................Standard Price or Rate

Inputs.........................................

Direct Materials.............................8.1 ounces.....................................................$3.00 per ounce

Direct labor....................................0.5 hours.....................................................$18.00 per hour

Variable overhead........................0.5 hours.........................................................$2.00 per hour

In December the company produced 4,200 units using 34,870 ounces of the direcct material and 1,900 direct labor hours.  During the month, the company purchased 39,700 ounces of the direct material at a total cost of $111,160.  The actual direct labor cost for the month was $35,530 and the actual variable overhead cost was $3,990.  The company applies variable overhead on  the basis of direct labor-hours.  The direct materials purchases variance is computed when the materials are purchased.

Required:

a. Compute the materials quantity cariance.

b. Compute the materials price variance.

c. Compute the labor efficiencey variance.

d. Compute the direct labor rate variance.

e. Compute the variable overhead efficiency variance.

f. Compute the variable overhead rate variance

Explanation / Answer

Standard Cost Sheet PU A Material Price Variance: F/A Component Qty Rate Price (SP-AP)Actual Qty Purchased Direct Material 8.1 3.00 24.30 (3-2.80)*39700 Direct Labor 0.5 18.00 9.00 7940 F Variable OH 0.5 2.00 1.00 34.30 A1 Material Usage Variance: Actual Cost (SQ-AQ Consumed)SP Component Qty Rate Price (34020-34870)*3 Direct Material 34870 2.80 97636 -2550 A Direct Labor 1900 18.70 35530 Variable OH 1900 2.10 3990 B Labor Price Variance: (SP-AP)Actual Hours Total 137156 (18-18.70)*1900 -1330 A Standard Cost (4200) Component Qty Rate Price B1 Labor Eff Variance: Material 34020 3.00 102060 (SH-AH)SP Labor 2100 18.00 37800 (2100-1900)*18 VOH 2100 2.00 4200 3600 F Total 144060 C VOH Price Variance: (SP-AP)Actual Hours (2-2.10)*1900 Materials: -190 A Total PurchaseCost 111160 Total Qty Purchased 39700 C1 VOH Eff Variance: Cost Per Ounces 2.80 (SH-AH)SP (2100-1900)*2 400 F

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