Rogen Corporation manufactures a single product. The standard cost per unit of p
ID: 2476626 • Letter: R
Question
Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below. The predetermined manufacturing overhead rate is $12 per direct labor hour ($18.00 1.50). It was computed from a master manufacturing overhead budget based on normal production of 9,000 direct labor hours (6,000 units) for the month. The master budget showed total variable costs of $54,000 ($6.00 per hour) and total fixed overhead costs of $54,000 ($6.00 per hour). Actual costs for October in producing 3,500 units we re as follows. The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored. (a) Compute all of the materials and labor variances. (b) Compute the total overhead variance.Explanation / Answer
Answer:
Total Material Variance = Material Price Variance (calculated as below) + Material Quantity Variance (calculated as below) = $366 U + $1,120 U = $1,486 U
Material Price Variance = Actual Quantity Purchased (Standard Price – Actual Price)
Or Actual Quantity Purchased x Standard Price – Actual Quantity Purchased x Actual Price
= (3,660 x 7) - $25,986
= $25,620 - $25,986
= $366 Unfavorable
Material Quantity Variance = Standard Price (Standard Quantity for Actual Production – Actual Quantity Used)
Standard Quantity for Actual Production = Actual Production x Standard Quantity needed for 1 unit = 3,500 Units x 1 pound per unit = 3,500 Pound
Material Quantity Variance = $7 (3,500 – 3,660) = $1,120 Unfavorable
Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance = $2,056 U + $1,221 F = $835 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
= (5,140 x $11.10) - $59,110
= $57,054 - $59,110
= $2,056 Unfavorable
Labor Efficiency Variance = Standard Rate per hour (Standard Hours for Actual Production – Actual Hours)
Standard Quantity for Actual Production = Actual Production x Standard hours needed for 1 unit = 3,500 Units x 1.50 hours = 5,250 Hours
Labor Efficiency Variance = $11.10 (5,250 – 5,140) = $1,221 Favorable
Total Overhead Variance = Actual Factory Overhead – Standard Factory Overhead
= ($44,098 + 21,202) – ($54,000 + 5,140*6)
= $65,300 - $84,840
= $19,540 favorable
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.