1. ABC Corporation makes a product with the following standard costs: Standard Q

Question

1. ABC Corporation makes a product with the following standard costs: Standard Quantity or Hours 4.3 pounds 0.7 hours 0.7 hours Standard Price or Rate S6.00 per pound $20.00 per hour S2.00 per hour Standard Cost Per Unit $25.80 $14.00 $1.40 Variable overhead. The company reported the following results concerning this product in September. 1,900 units 1,700 units 7,210 pounds 7,600 pounds 1,260 hours $43,320 $25,578 $2,394 Purchases of raw materials. Actual direct labor-hours.... Actual cost of raw materials purchases... The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Required: a. Compute the materials quantity variance. b. Compute the materials price variance., c. Compute the labor efficiency variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance.

Explanation / Answer

Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity                                                              = ( 6 - 43320/7600) x 7600                                                              = 2280 Fav Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Rate                                                              = ( 1700 x 4.3 - 7600 ) x 6                                                              = 1740 Unfav Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours                                                        = [20 - 20.3] x 1260                                                              = 378 Unfav Actual labor Price Per hour = Total Cost / total hours                                                                  = 25578 / 1260                                                                  = 20.30 per hour Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate                                                              = [1700 x 0.7 - 1260] x 20                                                              = 1400 Unfav Variable Overhead Spending Variance = (Standard Rate - Actual Rate) x Actual Hours                                                              = [2.00 -1.90 ] x 1260                                                              = 126 Fav Actual Overhead Per hour = Total Cost / total hours                                                                  = 2394 / 1260                                                                  = 1.90 per hour Variable Overhead Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate                                                              = [1700 x 0.7 - 1260] x 2                                                              = 140 Unfav

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