Standard Products Company recognizes variances from standards at the earliest op
ID: 2528073 • Letter: S
Question
Standard Products Company recognizes variances from standards at the earliest opportunity and the quantity of direct materials purchased is equal to the quantity used. The following information is available for the most recent month:
Direct Materials Direct Labor
Standard Quantity/ Unit 8.00 pound 3.6 hours
Standard Price/ Pound $8.20/ pound
Standard Price / Hour $8.00/hour
Actual quantity/unit 8.25 pound $3.8 hours
Actual price/pound $8.50 / pound
Actual price/Hour $7.50 / hour
Static Budget volume 800 units
Actual volume 900 units
Actual overhead $12,000
Actual fixed overhead $5,100
Standard variable overhead $5/ unit
Standard fixed overhead $5,600
Q1. Calculate the Direct Material Price and Volume Variances:
-Price Variance:
-Volume Variance
Q2. Calculate the Direct Labor Rate and Efficiency Variances:
-Rate Variance:
-Efficiency Variance:
Q3. Calculate the Variable overhead Spending and Efficiency Variances:
-Variable Overhead Spending Variance:
-Variable Overhead Efficiency:
Q4. Calculate the Fixed Overhead Budget and Volume Variances
-Fixed Overhead Budget Variance:
-Fixed Overhead Volume Variance:
Thank you!!!
Explanation / Answer
Solution:-
(1) Actual Qty in pound = 900*8.25 = 7425
Standard Qty for actual output = 900*8 = 7200
(a) DM Price variance = (Budgeted price-Actual price) * Actual Qty
= (8.20-8.50) * 7425 = 2227.5 (Adverse)
(b) DM Volume variance = (Standard Qty- Actual Qty) * Std Price
= (7200-7425) * 8.20 = 1845 (Adverse)
(2) Actual Hrs = 900*3.8 = 3420
Standard Hrs for actual output = 900*3.6 = 3240
(a) DL Rate variance = (Budgeted Rate-Actual Rate) * Actual Labour Hrs
= ((8-7.5) * 3420 = 1710 (Favourable)
(b) DL efficiency variance = (Standard Labour Hrs- Actual Hrs) * Std Rate
= (3240-3420) * 8 = 1440 (Adverse)
(3) (a) Variable O/H Spending variace = ( SR ? AR ) × A Hrs
Std variable O/H = 900*5 = 4500
Actual variable O/H = 12000-5100 = 6900
SR = 4500/3240 = 1.389
AR = 6900/3420 = 2.018
= (1.389-2.018) * 3420 = 2151.18 (Adverse)
(b) V/OH Efficiency variance = ( Std hrs-actual hrs) * AR
= (3240-3420) * 2.018 = 363.24 ( Adverse)
(4) (b) Fixed O/H volume variance =
Bdt F/Oh = 5600
Fixed Overhead Application Rate = 5600/800 = 7
Applied Fixed Overhead = 900*7 = 6300
= 6300-5600 = 700(f)
(a) F/OH Exp variance = 5600-5100 = 500(f)
F/OH cost variance = 6300-5100 = 1200(f)
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