Problem 25-1A Rogen Corporation manufactures a single product. The standard cost

Question

Problem 25-1A

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.

The predetermined manufacturing overhead rate is $14 per direct labor hour ($7.00 ÷ 0.50). It was computed from a master manufacturing overhead budget based on normal production of 2,500 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $16,250 ($6.50 per hour) and total fixed overhead costs of $18,750 ($7.50 per hour). Actual costs for October in producing 4,400 units were as follows.

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a)

Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

(b)

Compute the total overhead variance.

Explanation / Answer

Total Material Variance :-

= Actual Meterial Cost - (Actual Quantity*Standard Cost)

= $27816 - (4400*$6)

= $27816 - $26400

= $1416 U

Material Price Variance :-

= (Actual Quantity * Actual Price) - (Actual Quantity * Standard Price)

= $27816 - (4560 * $6)

= $27816 - $27360

= $456 U

Material Quantuty Variance :-

= Standard Price * (Actual Quantity - Standard Quantity)

= $6 * (4560 - 4400)

= $960 U

Total Labor Variance = Actual Labor Cost - (Standard Hours * Standard Rate)

= $26355 - (4400*0.5 * $12.35)

= $26355 - $27170

= $815 F

Labor Rate Variance = (Actual Hours * Actual Rate) - (Actual Hours * Standard Rate)

= $26355 - (2100 * $12.35)

= $26355 - $25355

= $420 U

Labor Quantity Variance = Standard Price * (Actual Hours - Standard Hours)

= $12.35 * (2100 - (4400*0.5))

= $1235 F

B) Total Overhead Variance :-

= Absorbed Cost - Actual Cost

= ($16250+$18750) - ($21558+$11142)

= $35000 - $32700

= $2300 F

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