XO-20 is an oil-based product used to remove rust on bolts and nuts that are stu
ID: 2473485 • Letter: X
Question
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.5-liter can of solution call for 0.78 liters of material and 4 hours of labor. (0.78 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $12.10. Overhead is applied at the rate of $15.61 per can. Expected production is 8,300 cans with fixed overhead per year of $35,109 and variable overhead of $11.38 per unit (a 0.5-liter can).
During 2015, 7,970 cans were produced; 12,600 liters of material were purchased at a cost of $56,574; 10,130 liters of material were used in production. The cost of direct labor incurred in 2015 was $347,760, based on an average actual wage rate of $10.35 per hour. Actual overhead for 2015 was $127,000.
Calculate material, labor, and overhead variances.(Round answer to 0 decimal places.)
Material Price Variance:
Material Quantity Variance:
Labor Rate Variance:
Labor Efficiency Variance:
Controllable Overhead Variance:
Overhead Volume Variance:
Explanation / Answer
Solution:
Material Price Variance = Actual Quantity Purchased (Standard Price – Actual Price)
Or
(Actual Quantity Purchased x Standard Price) – (Actual Quantity Purchased x Actual Price)
= (12,600 x $2.5) - $56,574
= $31,500 - $56,574
= $25,074 Unfavorable
Material Quantity Variance = Standard Price (Standard Quantity for Actual Production – Actual Quantity Used)
Standard Quantity for Actual Production = Actual Production Unit x Standard Quantity per unit = 7,970 x 0.78 = 6,216.60 liters
= $2.5 (6,216.60 – 10,130)
= $9,783.50 Unfavorable
Labor Rate Variance = Actual Hours (Standard Rate per hour – Actual Rate Per Hour)
Or
(Actual Hours x Standard Rate per hour) – (Actual Hours x Actual Rate Per Hour)
Actual Hour = Actual Labor Cost / Actual Average Rate per hour = $347,760 / 10.35 = 33,600 hours
= (33,600 x $12.10) – (33,600 x 10.35)
= 406,560 - $347,760
= $58,800 Unfavorable
Labor Efficiency Variance = Standard Rate per hour (Standard Hours for actual production – Actual Hours)
Standard Hours for actual production = Actual Production Unit x Standard Hours per unit = 7,970 x 4 = 31,880 Hours
= $12.10 (31,880 – 33,600)
= $20,812 Unfavorable
Please ask separate question for rest requirement…
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