Willow Inc. has provided the following information: Budgeted production = 7,200

Question

Willow Inc. has provided the following information:

Budgeted production = 7,200 units

a. Calculate the direct materials price variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



b. Calculate the direct materials quantity variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



c. Calculate the direct labor rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

   

d. Calculate the direct labor efficiency variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



e. Calculate the variable overhead rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



f. Calculate the variable overhead efficiency variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



g. Calculate the fixed overhead spending variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Standards: Per unit Direct materials 10 lb @ $4.00/lb $ 40.00 Direct labor 2 hours @ $28.50/hour 57.00 Variable overhead 2 hours @ $13/hour 26.00 Fixed overhead 15.00 Total $ 138.00

Explanation / Answer

Material: Std Qty required per unit of output: 10 lbs Std price per pound: $ 4 Actual output: 7300 units Std Qty allowed (7300*10): 73000 piunds Actual quantity: 73840 pounds Actual cost of material = 293455 Material price variance= Actual Qty *Std price - Actual material cost 73840*4 - $ 293455 = $ 1905 F Material Quantity variance= Std price (Std quantity -Actual quantity) 4.00 (73000-73840) = $ 3360 U Std labour hour per unt: 2 hours Std labour hours allowed (7300*2): 14600 hours Std labour rate per hour: 28.50/ hr Actual labour cocst: $ 411,100 Aactual labour hours: 14,650 hours Labour rate variance= Actual Hhours (Std rate) - Actual labour cost 14650*28.50 - $ 411,100 = $ 6425 F Labour efficiency variance= Std rate (Std hourrs-Actual hours) 28.50 (14600 -14650) = $1425 U Std OH rate per hour: $ 13 Actual variable oH incurred = $ 197030 Variable OH rate variance= Actual Hours (Std OH rate) * Actual OH Variable 14650*13 - $ 197030 = 6580 U Variable OH Efficiency Variancec= Std OH rate (Std hourrs-Aactual hours) 13 ( 14600 -14650 ) = $ 650 U Fixed OH spending variancec = Fixed OH budgeted -Actual fixed OH incurred (7200 unints @15) - $ 104,590 = $ 3410 F

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