Use the following data to find the direct labor efficiency variance if the compa

Question

Use the following data to find the direct labor efficiency variance if the company produced 3,500 units during the period. 19.) Georgia, Inc. has collected the following data on one of its products. The actual cost of the direct materials used is: 20.) A company's flexible budget for 47,000 units of production showed variable overhead costs of $68,150 and fixed overhead costs of $63,000. The company incurred overhead costs of $118,360 while operating at a volume of 39,000 units. The total controllable cost variance is:

Explanation / Answer

18.)

The difference between actual time incurred to manufacture a certain number of units and the time allowed by standards to manufacture that number of units multiplied by standard direct labor rate is called direct labor efficiency variance or direct labor quantity variance.

The formula is:

(Actual hours - Standard hours) x Standard rate = Labor efficiency variance

Actual Hours = 11,850

Standard hours = 14,000 (3,500 units * 4 hour per unit)

Standard rate = $7 per hour

Direct Labor efficiency variance = (11,850 – 14,000) * $7

Direct Labor efficiency variance = $15,050 Favorable

The variance is Favorable because labor worked 2150 hours less than what was allowed by standard.

19.)

Material Cost Variance (MCV)

Material cost variance is the deviation from the standard direct material cost, of the actual production volume and the actual cost of direct material. Material cost variance is also concerned as a sum of the direct material usage and price variances.

The following formula is used to calculate direct material cost variance:

MCV = (SQ x SP) - (AQ x AP)

Given

Material cost variance – unfavorable = $18,750

SQ = 30,000 units

SP = $6 per unit

-$18,750 = (30,000 * $6) – Actual cost of material

Actual coat of material = $180,000 + $18,750

Actual coat of material = $198,750

20.)

Factory overhead controllable variance is the difference between actual expenses incurred and the budget allowance based on standard hours allowed for work performed.

Factory overhead controllable variance is the responsibility of the department managers to the extent that they can exercise control over the costs to which the variances relate.

Following formula/equation is used for the calculation of controllable variance:

Controllable Variance = Actual overhead – Budgeted allowance based on standard hours allowed*

[*Fixed expenses budgeted + variable expenses (standard hours allowed for actual production * variable overhead rate)]

Actual Overhead cost = $118,360

Controllable Cost variance = $118,360 – ($63,000 + 39,000 units * $1.45{$68,150 / 47,000 nits)

Controllable Cost variance = $118,360 – ($63,000 + $56,550)

Controllable Cost variance = $118,360 - $119,550

Controllable Cost variance = $1,190 Favorable

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