PROBLEM 11-10. Comprehensive Variance Problem [LO 2, 3, 4, 6] Antikron Company p

Question

PROBLEM 11-10. Comprehensive Variance Problem [LO 2, 3, 4, 6] Antikron Company produces
rubber seals used in the aerospace industry.Standards call for 3 pounds of material at $2.50
per pound for each seal. The standard cost for labor is 1.5 hours at $15 per hour. Standard overhead
is $10 per unit. For the year 2015, expected production is 130,000 seals with fixed overhead
of $130,000 and variable overhead of $9 per seal. During 2015, a total of 125,000 seals were produced.
The company purchased 455,000 pounds of material for $1,150,000. Production required
425,000 pounds of material.The cost of direct labor incurred was $2,900,000 with an actual average
wage rate of $15.25 per hour. Actual overhead for the year was $900,000.
Required
a. Determine the standard cost per seal.
b. Calculate the material, labor, and overhead variances.
c. Prepare a summary of the variances, and indicate which variances should be investigated.

Explanation / Answer

a.

standard materail 3*2.5 7.5

standard labour 1.5*15 22.5

standar oh 10

fixed oh 1

total standard cost $41

b.

direct material price variance

455000(2.527 - 2.5) = $12285 A

direct material usage variance

2.5(425000 - 375000) = $125000 A

direct labour price variance

190164(15.25-15) = $47541 A

direct labour efficiency variance

15(190164-187500) = $39960 A

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