The Toronto plant of Jackman Company\'s Blackwell Division produces waffle irons

Question

The Toronto plant of Jackman Company's Blackwell Division produces waffle irons. The plant uses a standard cost system for production costing and control. The standard cost sheet for a waffle iron is attached During the year, the Toronto plant had the attached actual production activity. REQUIRED: (1)Compute the direct materials price variance based on the quantity purchased (2) (3) and the direct materials quantity variance based on the quantity used Compute the direct labor rate and efficiency variances. Compute the variable manufacturing overhead spending and efficiency variances. (4) Compute the fixed manufacturing overhead spending and volume variances

Explanation / Answer

Solution 1:

Standard quantity of material for actual production = 50000*3 = 150000 Lbs

Actual quantity of material purchased = 130000 lbs

Actual quantity of material consumed = 130000 + 25000 = 155000 lbs

Standard price of material = $4 lbs

Actual price of material = $3.70

Material price variance = (SP - AP) * AQ = ($4 - $3.70) * 130000 = $39,000 F

Material quantity variance = (SQ - AQ) * SR = (150000 - 155000) * $4 = $20,000 U

Solution 2:

Standard hours of direct labor = 50000 * 0.80 = 40000 hours

Standard rate of direct labor = $12 per hour

Actual hours of direct labor = 41000 hours

Actual rate of direct labor = $533,000/ 41000 = $13 per hour

Direct labor rate variance = (SR - AR) * AH = ($12 - $13) * 41000 = $41,000 U

Direct labor efficiency variance = (SH - AH) * SR = (40000 - 41000) * $12 = $12,000 U

Solution 3:

Standard hours of direct labor = 50000 * 0.80 = 40000 hours

Standard rate of variable overhead = $6 per hour

Actual hours of direct labor = 41000 hours

Actual rate of variable overhead = $250,000 / 41000 = $6.07956 per hour

Variable overhead rate variance = (SR - AR) * AH = ($6 - $6.07956) * 41000 = $4,000 U

Variable overhead efficiency variance = (SH - AH) * SR = (40000 - 41000) * $6 = $6000 U

Variable overhead spending variance = $4,000 U + $6,000 U = $10,000 U

Solution 4:

Budgeted fixed overhead = 45000*2.40 = $108,000

Actual fixed overhead = $95,000

Fixed overhead applied = 50000 * $2.40 = $120,000

Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead = $108,000 - $95,000 = $13,000 F

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = $120,000 - $108,000 = $12,000 F

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