Compute the variances based on the problem data below. Colonial Pewter makes pew

Question

Compute the variances based on the problem data below. Colonial Pewter makes pewter bookends. Use the data below to calculate the 2 variances and the total variance. Also state whether each variance is F (Favorable) or U (Unfavorable). 2,000 pewter bookends were produced. Standards used: Direct Materials: 4 pounds x $5.00 per pound = $20 per unit Direct Labor: 3 hours per unit x $9.00 per hour = $27 per unit Var. Manuf. Overhead: 3 hours per unit x $4.00 per hour = $12.00 per unit Actual costs: Materials purchased: 7,000 pounds of pewter were purchased for $4.00 per pound for $28,000 Direct Labor 5,000 hours at $11 per hour was paid for $55,000. Var. Manuf. Overhead: $10,000 (assume 2,000 labor hours at $5.00 per hour)

Explanation / Answer

Standard Price Standard Standard    (Rate) Unit Cost Quantity      Direct materials 4 lbs.     $ 5 per lb. $ 20   Direct labor 3 hrs.     $ 9 per hr. 27   Variable manufacturing overhead 3 hrs.     $ 4 per hr. 12    (based on direct labor hours) Total 59 Actual Results Actual Units Prodcued Actual Qty used Actual Cost Actual Qty/Hr per unit Actual Rate/lb/Hr Std Qty/Hr For Actual Output Std Cost/Actual output   Direct materials (clay)             2,000            7,000             28,000         4.00             4.00             8,000        40,000   Direct labor             2,000            5,000             55,000      11.00           11.00             6,000        54,000   Variable manufacturing overhead             2,000            2,000             10,000      5.000             5.00             6,000        24,000    (based on direct labor hours)                 -          1 Direct Materials Price Variance= Actual Qty Used( Actual Rate-Std Rate) =7000*(4-5)             7,000 (F)        2 Direct Material Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output)   =5*(7000-8000)             5,000 (F)        3 Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =5000*(11-9)          10,000 (U)        4 Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output)      =9*(5000-6000)             9,000 (F)        5 Variable Overhead Rate Variance= Actual Qty Used( Actual Rate-Std Rate) =2000*(5-4)             2,000 (U)        6 Variable Overhead Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output)      =4*(2000-6000)          16,000 (F)

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