Variable cost variances: The Following data reflect the current month\'s activit

Question

Variable cost variances: The Following data reflect the current month's activity forSills, Inc: Actual total directlabor                                                                                              $364,000 Actual hoursworked                                                                                                   26,000 Standard labor-hours allowed for actual output (flexiblebudget)                                   27,000 Direct labor pricevariance                                                                                          $13,000U Actual variableoverhead                                                                                             $88,400 Standard variable overhead rate per standard directlabor-hour                                    $3.50 Variable overhead is applied based on standard directlabor-hours allowed. Required: compute the labor and variable overhead price and efficiencyvariances. Variable cost variances: The Following data reflect the current month's activity forSills, Inc: Actual total directlabor                                                                                              $364,000 Actual hoursworked                                                                                                   26,000 Standard labor-hours allowed for actual output (flexiblebudget)                                   27,000 Direct labor pricevariance                                                                                          $13,000U Actual variableoverhead                                                                                             $88,400 Standard variable overhead rate per standard directlabor-hour                                    $3.50 Variable overhead is applied based on standard directlabor-hours allowed. Required: compute the labor and variable overhead price and efficiencyvariances.

Explanation / Answer

Labor EfficiencyVariance       =      (Actual Hours - Standard Hours) x Standard rate                                              =      (26,000 hours - 27,000) x$13.50 (see calculation below)                                               =      $13,500Favorable      To get Standard labor rate we need to use labor price variancegiven in the question i.e. $13,000U Actual rate = $364,000 / 26,000hours   =   $14 (Standard Rate - Actual Rate) x Actual hours = -$13,000 (SR - Actual Rate) x 26,000   =    - $13,000 SR - $14 =   -$13,000 / 26,000 =-$0.50        Or SR = $13.50 _________________________________________________________________________________________ Variable overhead pricevariance    =   AQx (AP – SP)          ActualPrice =$88,400/26,000   =   $3.40                                                       =   26,000x ($3.40 - $3.50)   =   $2,600Favorable __________________________________________________________________________________________ Variable overhead efficiencyvariance    =    SPx (AQ – SQ)                                                             =   $3.50 x (26,000 -27,000)   =   $3,500 Favorable

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.