E10-4A. Material, Labor, and Variable Overhead Variances The following summarize

Question

E10-4A. Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Thomas Corporation's April operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours Standard Unit Costs Total Actual Costs Direct material: Standard (2 lb. @ $9??.) $18 $42,840 Direct labor Standard (0.5 hr. @ $24/hr.) 12 22,230 Variable overhead 3 6,450 $71,520 $33 Determine the materials price and efficiency variances, labor rate and eficiency variances, and variable overhead spending and efficiency variances.

Explanation / Answer

1. Materials price variance = (Standard price - actual price) x Material purchased
= {$9 - $10.20} x 4,200 = $5,040 Unfavorable

Materials quantity variance = (Standard quantity - actual quantity used) x standard price
= {(2,000 x 2) - 4,200} x $9 = $1,800 Unfavorable

2. Labor rate variance = (Standard rate - actual rate) x Actual hours used
= {$24 - $23.40} x 950 = $570 Favorable

Labor efficiency variance = (Standard hours - actual hours) x Standard rate
= {(2,000 X0.5) - 950} x $24 = $1,200 Favorable

3. Variable overhead spending variance = (Standard rate - actual rate) x Actual hours used
= {$6 - ($6,450 / 950)} x 950 = $750 Unfavorable

Variable overhead efficiency variance = (Standard hours - actual hours) x Standard rate
= {(2,000 X0.5) - 950} x $6 = $300 Favorable

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