The following summary data relate to the operations of Beckett Company for July,

Question

The following summary data relate to the operations of Beckett Company for July, during which 12,000 finished units were produced: Direct material: Standard (0.8 lb. @ $6.00/lb.) Actual (8,500 lb. @ $6.25/lb.) Direct labor: Standard (1 hr. @ $16.00/hr.) Actual (12,700 hrs. @ $15.60/hr.) Variable overhead: Standard (1 hr. @ $10.00/hr.) Actual ($121,000) Required: Compute the following variances and indicate whether each is favorable (F) or unfavorable (U). 1. Materials price variance 2. Materials efficiency variance 3. Labor rate variance 4. Labor efficiency variance 5. Variable overhead spending variance 6. Variable overhead efficiency variance

Explanation / Answer

1 Materials price variance $2125 Unfavorable (AQ x AP) - (AQ x SP) = (8500 x $6.25) - (8500 x $6.00) = $2125 2 Materials efficiency variance $6600 Favorable (AQ x SP) - (SQ x SP) = (8500 x $6.00) - (9600 x $6.00) = $-6600 SQ = 12000 units x 0.8 lb. = 9600 lb. 3 Labor rate variance $5080 Favorable (AH x AR) - (AH x SR) = (12700 x $15.60) - (12700 x $16.00) = $-5080 4 Labor efficiency variance $11200 Unfavorable (AH x SR) - (SH x SR) = (12700 x $16.00) - (12000 x $16.00) = $11200 SH = 12000 units x 1 hour = 12000 hours 5 Variable overhead spending variance $6000 Favorable (AH x AR) - (AH x SR) = $121000 - (12700 x $10.00) = $-6000 6 Variable efficiency variance $7000 Unfavorable (AH x SR) - (SH x SR) = (12700 x $10.00) - (12000 x $10.00) = $7000

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