A company has recently implementeda standard cost system. The company\'s cost ac

Question

A company has recently implementeda standard cost system. The company's cost accountant has providedthe following data to perform a variance analysis forMay:

fixed overheadbudgeted                          $24,000 per month

normal level ofproduction                      12,000 units per month

variable overhead applicationrate               $1.80 per unit

fixed overhead applicationrate

( $24,000/12,000units)                               $2.00per unit

pounds of materials purchased&used                39,000 pounds

cost of directlabor                                              $23,100

hours of directlabor                                            4,200 hours

cost of variableoverhead                                        $17,750

**Compute the following variances,Indicate whether each variance if favorable orunfavorable.

a. materials price variance:$________

b. materials quantityvariance:$________

c. labor ratevariance:$__________

Explanation / Answer

Actual Price of Material 429,000/39,000 11.00 Standard Price of Material 12.00 Actual Quantity Used 39,000.00 a Material Price Variance (11-12)×39000 (39,000.00) F [Actual Quantity Used × (Actual Price - Standard Price)] Actual Quantity Used 39,000.00 Standard Quantity allowed 10,000×4 40,000.00 b 12 ×(39,000 - 40,000) (12,000.00) F c Direct Labor Variance Actual Rate per Hour(23,100/4,200) 5.50 Standard Rate per Hour 7.00 Direct Labor Variance (5.5- 7)×4200 (6,300.00) F Direct Labor Variance

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