REQUIRED: Compute the direct materials, direct labor, and variable manufacturing
ID: 2393424 • Letter: R
Question
REQUIRED:
Compute the direct materials, direct labor, and variable manufacturing overhead variances.
Note: the Answers should be computerized
ABS Company produces a product ALPHA. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The standard costs for one unit of product are as follows: Direct material: 0.5 kilo at $2 per kilo Direct labor: 2.2 hours at $10 per hour Variable manufacturing overhead: 2.2 hours at $6 per hour1.2 Total standard variable cost per unit $1 $15 During January, 2,000 units were produced. The costs associated with January's operations were as follows: Material purchased: 3,000 kilos at $1.60 per kilo. Material used in production: 2,800 kilos Direct labor: 1,800 hours at $10.75 per hour190 Variable manufacturing overhead costs incurred$,800 $4,800Explanation / Answer
Direct Material Price Variance = (SR – AR) * Actual Qty purchased
SR = $ 2
AR = $ 1.60
Actual Qty purchase = 3000 kilos
=(2 – 1.60) * 3000 = 1200 (F)
Direct Material Quantity Variance = (Std Qty used – Actual Qty used) * SR
Std Qty used = Actual Output * SQ per unit
= 2000 units * 0.5 = 1000 units
AQ used = 2800 kilos
=(1000 – 2800) * 2 = 3600 (U)
Direct Labour Price Variance = (SR – AR) * A Hrs
SR = $ 10
AR = $10.75
A Hrs = 1800 hrs
=(10 – 10.75) * 1800 = 1350(U)
Direct Labour Efficiency Variance = (S Hrs – A Hrs) * SR
S Hrs = Actual Output * S hr per unit
= 2000 * 2.2 = 4400 hrs
= (4400 – 1800) * 10 = 26000(F)
Variable O/H Price Variance = (SR – AR) * A Hrs
SR = $ 6
AR = 3800/1800 = 2.11
A Hrs = 1800 hrs
=(6 – 2.11) * 1800 = 7000 (F)
Variable O/H Efficiency Variance = (S Hrs – A Hrs) * SR
S Hrs = Actual Output * S hr per unit
= 2000 * 2.2 = 4400 hrs
= (4400 – 1800) * 6 = 15600(F)
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