In June the company produced 4.300 units using 16.950 grams of the direct materi

Question

In June the company produced 4.300 units using 16.950 grams of the direct material and 2.470 direct labor-hours During the month the company purchased 24.200 grams of the direct material at a price of $8 80 per gram. The actual direct labor rate was $16.60 per hour and the actual variable overhead rate was $2.90 per hour. The materials price variance is computed when materials are purchased Variable overhead is applied on the basis of direct labor-hours. Required: Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase: (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable. "U" for unfavorable, and "None" for no effect (i.e.. zero variance). Omit the "$" sign in your response.)

Explanation / Answer

1

Calculation of Direct Material Quantity Variance:

Formula :

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) *Standard Price

Actual Quantity =

16950

Standard Quantity = 4300 Units *3.8 =

16340

Standard Price =

$ 9.00

Direct Material Quantity Variance = (16950-16340) *9

$5,490

U

2

Calculation of Direct Material Price Variance:

Formula :

Direct Material Price Variance = (Actual Price - Standard Price) *Actual Quantity

Actual Price =

$ 8.80

Standard Price =

$ 9.00

Actual Quantity =

24200

Direct Material Price Variance = (8.80-9) *24200

4,840

F

3

Calculation of Direct Labor Efficiency Variance:

Formula :

Direct Labor Efficiency Variance = (Actual Hours - Standard hours) *Standard Rate

Actual Hours

2470

Standard Hours (4300 Units *0.5)=

2150

Standard Rate

$16.00

Direct Labor Efficiency Variance = (2470-2150) *16

$5,120

U

4

Calculation of Direct Labor Rate Variance:

Formula :

Direct Labor Rate Variance = (Actual Rate - Standard Rate) *Actual Hours

Actual Rate =

$16.60

Standard Rate

$16.00

Actual Hours

2470

Direct Labor Rate Variance = (16.60-16) *2470

$1,482

U

1

Calculation of Direct Material Quantity Variance:

Formula :

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) *Standard Price

Actual Quantity =

16950

Standard Quantity = 4300 Units *3.8 =

16340

Standard Price =

$ 9.00

Direct Material Quantity Variance = (16950-16340) *9

$5,490

U

2

Calculation of Direct Material Price Variance:

Formula :

Direct Material Price Variance = (Actual Price - Standard Price) *Actual Quantity

Actual Price =

$ 8.80

Standard Price =

$ 9.00

Actual Quantity =

24200

Direct Material Price Variance = (8.80-9) *24200

4,840

F

3

Calculation of Direct Labor Efficiency Variance:

Formula :

Direct Labor Efficiency Variance = (Actual Hours - Standard hours) *Standard Rate

Actual Hours

2470

Standard Hours (4300 Units *0.5)=

2150

Standard Rate

$16.00

Direct Labor Efficiency Variance = (2470-2150) *16

$5,120

U

4

Calculation of Direct Labor Rate Variance:

Formula :

Direct Labor Rate Variance = (Actual Rate - Standard Rate) *Actual Hours

Actual Rate =

$16.60

Standard Rate

$16.00

Actual Hours

2470

Direct Labor Rate Variance = (16.60-16) *2470

$1,482

U

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