Helix Company produces several products in its factory, including a karate robe.
ID: 2431199 • Letter: H
Question
Helix 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 has a denominator activity level of 780 direct labour-hours each month, which should result in the production of 1,950 robes. The standard costs associated with this level of production are as follows: Per Unit of Product Total $35,490 $18.20 $7,020 Direct materials Direct labour Variable manufacturing overhead 2,340 Fixed manufacturing overhead 3.60 1.20 2.40 $25.40 $4,680 Based on direct labour-hours During April, the factory worked only 760 direct labour-hours and produced 2,000 robes. The following actual costs were recorded during the month Per Unit of Product Total Direct materials (6,000 metres) Direct labour Variable manufacturing overhead Fixed manufacturing overhead $ 7,600 $ 3,800 $ 4,600 $36,000 $18.00 3.80 1.90 2.30 $26.00 At standard, each robe should require 2.8 metres of material. All of the materials purchased during the month were used in production. Required Compute the following variances for April: 1. The materials price and quantity variances. 2. The labour rate and efficiency variances 3. The variable manufacturing overhead spending and efficiency variances 4. The fixed manufacturing overhead budget and volume variancesExplanation / Answer
Actual DATA for
2000
units
Quantity (AQ)
Rate (AR)
Actual Cost
Direct Material
6000
$ 6.000
$ 36,000.00
Direct labor
760
$ 10.000
$ 7,600.00
Variable Overhead
760
$ 5.000
$ 3,800.00
Standard DATA for
2000
units
Quantity (SQ)
Rate (SR)
Standard Cost
Direct Material (2000*2.8)
5600
$ 6.50
$ 36,400.00
Direct labor(780/1950*2000)
800
$ 9.00
$ 7,200.00
Variable Overhead
800
$ 3.00
$ 2,400.00
Material Price Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Quantity
(
$ 6.50
-
$ 6.00
)
x
6000
3000
Variance
3000
Favorable-F
Material Quantity Variance
(
Standard Quantity
-
Actual Quantity
)
x
Standard Rate
(
5600
-
6000
)
x
$ 6.50
-2600
Variance
2600
Unfavorable-U
Labor Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 9.00
-
$ 10.00
)
x
760
-760
Variance
760
Unfavorable-U
Labour Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
800
-
760
)
x
$ 9.00
360
Variance
360
Favorable-F
Variable Manufacturing Overhead Rate Variance
(
Standard Rate
-
Actual Rate
)
x
Actual Labor Hours
(
$ 3.00
-
$ 5.00
)
x
760
-1520
Variance
1520
Unfavorable-U
Variable Overhead Efficiency Variance
(
Standard Hours
-
Actual Hours
)
x
Standard Rate
(
800
-
760
)
x
$ 3.00
120
Variance
120
Favorable-F
Data for Fixed Overhead Variances
Hrs
Rate
Amount
Fixed Overhead Budgeted
780
$ 6.00
$ 4,680.00
Standard FO Applied
800
$ 6.00
$ 4,800.00
Actual Fixed Overhead incurred
800
$ 6.00
$ 4,600.00
Fixed Overhead Budget Variance
(
Fixed Overhead Budgeted
-
Actual Fixed Overhead incurred
)
(
$ 4,680.00
-
$ 4,600.00
)
$ 80.00
Variance
80
Favorable-F
Fixed Overhead Production Volume Variance
(
Fixed Overhead Budgeted
-
Standard FO Applied
)
(
$ 4,680.00
-
$ 4,800.00
)
-120
Variance
120
Favorable-F
Actual DATA for
2000
units
Quantity (AQ)
Rate (AR)
Actual Cost
Direct Material
6000
$ 6.000
$ 36,000.00
Direct labor
760
$ 10.000
$ 7,600.00
Variable Overhead
760
$ 5.000
$ 3,800.00
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