Production Company\'s standard and actual costs per unit for the most recent per
ID: 2504748 • Letter: P
Question
Production Company's standard and actual costs per unit for the most recent period, during which 400 units were actually produced, are given below. From the information, compute the following variances. Show where the variance is favorable or unfavorable.
a. Materials price variance
b. Materials quantity variance
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead rate variance.
f. Variable overhead efficiency variance.
Standard Materials: Standard 2 foot at 3.00 1.50 per foot Materials Actual 2.1 foot at 1.60 per foot Direct labor: Standard 1.5 hours 9.00 at 6.00 per hour Direct labor: Actual 1.4 hours at 65 per hour Variable overhead: Standard 1.5 5.1 hours at 3.4 per hour Variable overhead: Actual 1.4 hours at 3.10 per hour Total Unit Cost 17.10 Actua 3.36 9.10 4.34 16.80Explanation / Answer
a. Material Price Variance= Actual Quantity x Actual Price - Actual Quantity x Standard Price
= AQ x AP - AQ x SP
= AQ(AP -SP)
=400(3.36 -3.00)
=400(0.36)
=144 (Favourable)
b.Material Quantity Variance=Actual Quantity xStandard Price - Standard Quantity xStandard
Price
=SP(AQ-SQ)
=3.00(2.1-2)
=3.00(0.1)
=0.3(Favourable)
c.Direct Labor rate variance= Actual Hours x Actual Rate-Actual HoursxStandard Rate
=1.4x6.50 -1.4x6.00
=1.4(6.50 - 6.00)
=1.4(0.50)
=0.7(F)
d.Direct Labor efficiency variance=Actual HoursxStandard Rate -Standard Hours xStandard
Rate
=1.4x6.00-1.5x6.00
=6.00(1.4-1.5)
=6.00(-0.1)
=0.6(Unfavourable)
e.Variable overhead rate variance= (AHxAR)-(AHxSR)
=AH(AR-SR)
=1.4(3.10-3.40)
=1.4(-0.30)
=0.42(U)
f.Variable overhead efficiency variance=(AHxSR)-(SHxSR)
=SR(AH-SH)
=3.40(1.4-1.5)
=3.40(-0.1)
=0.34(U)
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