Computation of Variances and Other Missing Data The following data for O\'Keefe

Question

Computation of Variances and Other Missing Data

The following data for O'Keefe Company pertain to the production of 300 units of Product X during December.

Selected data items are omitted. Fill in the missing amounts.

Direct materials (all materials purchased were used during period)

Standard cost per unit: _____ pounds at $3.20 per pound

Total actual cost: ______pounds costing $5,676

Standard cost allowed for units produced: $5,760

Materials price variance: $_______   U or F

Materials quantity variance: $128 U

Direct labor Standard cost: 2 hours at $7.00

Actual cost per hour: $7.25

Total actual cost: $_______

Labor rate variance: $________ U or F

Labor efficiency variance: $140 U

Variable overhead Standard costs: _______hours at $4.00 per direct labor hour

Actual cost: $2,250

Variable overhead spending variance: $________ U or F

Variable overhead efficiency variance: $________ U or F

Explanation / Answer

1. Standard cost per unit = 6 Pounds @ $3.20 per pound

2. Total Actual Cost = 1760 pounds costing $5,676

3. Material Price variance = Actual quantity x (Standard price per poound - Actual price per pound)

                                         = 1760 x ( 3.20 - 3.225) = $44 U

4. Material quantity variance = Standard price per pound x (Standard quantity - Actual quantity)

                                              = 3.20 (1800 - 1760) = $128   F

5. Total actual labour cost = $4,205

6. Labour Rate variance = Actual labour hours x (Standard labour rate- Actual labour rate)

                                       = 580 x (7-7.25) = $145     U

7. Variable overhead standard costs = 600 hours @ $4 per direct labour hour

8.Variable overhead spending variance = Actual hours(standard rate - actual rate) = 580(4- 3.88) = 70  F

9. Variable overhead efficiency variance = Standard labour hour rate x (Standard labour hours - Actual labour hours)

                                                                =  4 (600 - 580) = $80        F

Working Notes:

1. Standard quantity per unit

    Suppose standard quanitty per unit is x; Standard for 300 units is = 300 x ;

    Standard cost allowed = Standard hours x standard rate per pound

              $5,760               = 300x * 3.20

               5,760               = 960 x

                  x                    = 5760/960 = 6 units

    Hence, Standard units allowed for production of 300 units = 300 x 6 = 1,800 units

2. Actual Quantity

   Material Quantity variance = Standard rate ( standar quantity - Actual quantity)

              128                         = 3.20 (1800 - Actual quantity )

              128                         = 5760 - 3.20 Actual quantity)

      Actual quantity               = 5760 - 128/3.20 = 1760 units

3. Actual price per pound = Actual cost / Acutal units = 5676/1740 = 3.225

4. Actual labour hours

   Labour efficiency variance = Standard labour rate (Standard labour hours - actual labour hours)

                 140-                     =           7( 300 x 2 - Actual labour hours)

                  140                     =           7(600 - Actual labour hours)

                  140                     =         (4200 - 7 Actual labour hours)

                  7 Actual labour hours = 4,200 - 140 = 4060

                     Actual labour hours = 4060/7 = 580 hours

5. Actual labour cost = Actual hours x Actual labour hour rate = 580 x 7.25 = $4,205

6. Actual variable overhead rate = Actual cost/ actual hours = $2,250/580 = $3.88

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