In June the company produced 5,100 units using 24,710 grams of the direct materi

Question

In June the company produced 5,100 units using 24,710 grams of the direct material and 2,550 direct labor- hours. During the month the company purchased 25,000 grams of the direct material at a price of dollar 6.80 per gram. The actual direct labor rate was dollar 14.60 per hour and the actual variable overhead rate was dollar 1.90 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 "dollar" sign in your response.)

Explanation / Answer

Solution:

a)

Direct Material Quantity Variance = Standard Price (Standard Quantity for actual production – Actual Quantity Used)

Standard Quantity for actual production = Actual Output x Standard Quantity needed for 1 unit = 5,100 x 4.6 grams = 23,460 grams

Direct Material Quantity Variance = $7 (23,460 – 24,710)

= $8,750 U

b)

Direct Material Price Variance = Actual Quantity Purchased (Standard Price – Actual Price)

= 25,000 ($7 - $6.80)

= $5,000 F

c)

Direct Labor Efficiency Variance = Standard Rate per hour (Standard Hours for actual production – Actual Hours)

Standard Hours for actual production = Actual Production x Standard Hours needed for 1 unit = 5,100 units x 0.4 hours = 2,040 hours

Direct Labor Efficiency Variance = $14 (2,040 – 2,550) = $7,140 U

d)

Direct Labor Rate Variance = Actual Hour (Standard Rate per hour – Actual Rate Per Hour)

= 2,550 ($14 - $$14.60)

= $1,530 U

please ask separate question for balance part....

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