Wolverine Inc. had the following standards for their production of a specialty d

Question

Wolverine Inc. had the following standards for their production of a specialty desk designed to work with laptops, tablets and smartphones. The standards are based on 500,000 labor hours Materials: 6 lbs. $5 per lb. Labor: Fixed OH: $500,000 Variable OH: $5 per DL hr 10 hrs.@ $7 per hr. Fixed OH was calculated based on an estimated production level of 250,000 hours During the month of March, the following occurred: Production: Materials Purchased: Materials Used Direct Labor Fixed OH 30,000 200,000 lbs@$5.15 per lb. 160,000 lbs 320,000 hrs@$6.80 per hr $512,000 Standard 25,000 $ 500,000 $1,250,000* 1,750,000 Budgeted 30,000 $500,000 $1,500,000 $2,000,000 Actual 30,000 Units S 512,000 $1.450,000 $1,962,000 Fixed Overhead Variable Overhead Total Overhead The 250,000 standard units was found by taking the 250,000 expected hours to be worked and dividir by the 10 hours per unit to arrive at estimated or standard production of 25,000 units. Predetermined overhead application rate is $7 per DL hour found by taking the $5 variable cost per C hour+$2 fixed cost per DL hour. $5 per hr x 10 hrs per unit x 25,000 units *$5 per hr x 10 hrs per unit x 30,000 units Find: 1. Standard Cost 2. Materials Price Variance 3. Materials Usage Variance 4. Total Materials Variance 5. Labor Rate Variance 6. Labor Efficiency Variance 7. Total Labor Variance 8. Overhead Budget Variance 9. Overhead Volume Variance 10. Total Overhead Variance

Explanation / Answer

1.

Standard Cost per unit

Material (6lbs x $ 5)

$                         30

Labor (10hrs x $7)

$                         70

Fixed OH (10 hrs x $ 2)

$                         20

Variable OH (10 hrs x $ 5)

$                         50

Total

$                       170

Fixed OH per hr = $ 500,000/250,000 LH

                             = $ 2 /LH

2.

Material Price Variance = (Actual price – Standard price) x Actual quantity

                                          = ($ 5.15 - $ 5) x 160,000 = $ 0.15 x 160,000 = $ 24,000       U

3.             

Standard quantity of direct material for actual production

= Standard material quantity needed per unit x actual unit of production

= 6lbs x 30,000 units = 180,000 lbs

Material Usages Variance = (Actual quantity - Standard quantity) x Standard price

                                              = (160,000 – 180,000) x $ 5

                                              = - 20,000 x $ 5 = - $ 100,000      F

4. Total Material Variance = Material Price Variance + Material Usages Variance

                                               = $ 24,000 + (- $ 100,000) = - $ 76,000   F

5.

      

Labor Rate Variance = (Actual rate - Standard rate) × Actual hour

                                     = ($ 6.80 - $ 7) x 320,000

                                     = - $ 0.2 x 320,000 = - $ 64,000     F

6.

Standard hours of direct labor for actual production

= Standard hours needed per unit x actual unit of production

= 10 hours x 30,000 = 300,000 hours

Labor Efficiency Variance = (Actual hours - Standard hours) x Standard rate

                                     = (320,000 – 300,000) x $ 7

                                   = 20,000 x $ 7 = $ 140,000    U

7.

Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance

                              = - $ 64,000 + $ 140,000 = $ 76,000     U

*******Answered first (4 + 3) questions.

Standard Cost per unit

Material (6lbs x $ 5)

$                         30

Labor (10hrs x $7)

$                         70

Fixed OH (10 hrs x $ 2)

$                         20

Variable OH (10 hrs x $ 5)

$                         50

Total

$                       170

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