Each unit requires 0.1 hour of direct labor. a. Determine the price variance, qu
ID: 2434893 • Letter: E
Question
Each unit requires 0.1 hour of direct labor.
a. Determine the price variance, quantity variance, and total direct materials cost variance. Use the minus sign to enter favorable variances as negative numbers.
b. Determine the rate variance, time variance, and total direct labor cost variance. Use the minus sign to enter favorable variances as negative numbers.
c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Use the minus sign to enter favorable variances as negative numbers.
Explanation / Answer
a)
Material price variance:
Material price variance = (Standard price – Actual price) * Actual quantity
= ($8.10 - $8.32) * 4,250 lbs
= -$0.22* 4,250 lbs
= - $935 (Unfavourable).
Material quantity variance:
Material quantity variance = (Standard quantity – Actual quantity) * Standard price
= (4,280 lbs – 4,250 lbs) * $8.10
= 30 lbs * $8.10
= $243 (Favourable)
Total direct materials cost variance:
Total direct materials cost variance = (Standard quantity*Standard price) – (Actual quantity*Actual price)
= (4,280*$8.10) – (4,250*$8.32)
= $34,668 - $35,360
= - $692 (Unfavourable)
b)
Labor rate variance:
Labor rate variance = (Standard rate – Actual rate) * Actual hours
= ($17.50 - $17) * 2,400 hours
= $0.50*2,400 hours
= $1,200 (Favourable)
Labor time variance or Labor efficiency variance:
Labor time variance = (Standard hours – Actual hours) * Standard rate
= (2,350 hours – 2,400 hours) * $17.50
= - 50 hours * $17.50
= - $875 (Unfavourable)
Total direct labor variance:
Total direct labor variance = (Standard hours * Standard rate) – (Actual hours * Actual rate)
= (2,350*$17.50) – (2,400*$17)
= $41,125 - $40,800
= $325 Favourable
c)
Variable overhead control variance:
Variable overhead control variance = (Standard variable cost per hour * Standard hours allowed for direct labor) – Actual variable cost
= ($2.20 * 2,350 direct labor hours) - $5,020
= $5,170 - $5,020
= $150 (Favourable)
Fixed overhead control variance:
Fixed overhead control variance = (Standard fixed cost per hour * Standard hours allowed for direct labor at normal capacity) – Actual fixed cost
= ($3.50 * 2,000 direct labor hours) - $7,000
= $7,000 - $7,000
= $0
Total factory overhead cost variance:
Total factory overhead cost variance = Variable overhead control variance + Fixed overhead control variance
= $150 + $0
= $150 (Favourable).
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