Lewis Company has provided the following information: Standard variable cost per

Question

Lewis Company has provided the following information: Standard variable cost per unit: Direct material Direct labor Variable mfg overhead 12.00 60 ounces at $0.20 per ounce 10.00 0.5 hours at $20.00 per hour 4.80 0.4 hours at $12 per hour $26.80 Variable manufacturing overhead is applied to products on the basis of direct-labor hours Actual units produced 4,000 Actual variable cost per unit: Direct material purchased Direct material used in production Direct labor Variable mfg overhead $75,000 250,000 ounces at $0.30 per ounce 240,000 ounces 1,550 hours @$20.50 per hour $31,775 $ 19,995 Calculate the following amounts Labor rate variance Labor efficiency variance Spending variance Variable manufacturing variances

Explanation / Answer

Labour rate variance = (20-20.50)*1550 = $775 U

Labour efficiency variance= (4000*.50-1550)*20 =$ 9,000 F

Labour spending variance = (4000*10-31775) = $8,225 F

Variable overhead rate variance = (12*1550-19995) = $1,395 U

Labour efficiency variance= (4000*.40-1550)*12 = $600 F

Labour spending variance = (4000*4.80-19995) = $795 U

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