Silmon Corporation makes a product with the following standard costs: In June th

Question

Silmon Corporation makes a product with the following standard costs:

In June the company produced 5,000 units using 29,750 grams of the direct material and 2,660 direct labor-hours. During the month the company purchased 24,900 grams of the direct material at a price of $5.80 per gram. The actual direct labor rate was $13.60 per hour and the actual variable overhead rate was $2.90 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor-hours.

Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase: (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

   Standard Quantity
or Hours Standard Price
or Rate   Direct materials 5.7 grams $ 6.00 per gram   Direct labor 0.5 hours $ 13.00 per hour   Variable overhead 0.5 hours $ 3.00 per hour

Explanation / Answer

$(6 - 5.80) * 29750 = $5950F

$(2500 - 2660) * 13 = $2080U

$(13 - 13.60) * 2660 = $1596U

$(2500 - 2660) * 3 = $480U

a. Direct materials quantity variance $(28500 - 29750)*6 = $7500U b. Direct materials price variance

$(6 - 5.80) * 29750 = $5950F

c. Direct labor efficiency variance

$(2500 - 2660) * 13 = $2080U

d. Direct labor rate variance

$(13 - 13.60) * 2660 = $1596U

e. Variable overhead efficiency variance

$(2500 - 2660) * 3 = $480U

f. Variable overhead rate variance $( 3 - 2.90) * 2660 = $266F

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