The standard cost sheet for Chambers Company, which manufactures one product, fo

Question

The standard cost sheet for Chambers Company, which manufactures one product, follows:

The standard cost sheet for Chambers Company, which manufactures one product, follows: Direct materials, 30 yards at $2.50 per yard Direct labor, 4 hours at $25 per hour Factory overhead appied at 85% of direct labor (vanable costs $60; fixed costs $25) Variable selling and administratve Foxed selling and administrative $ 75 100 85 75 51 S 386 Total unit costs Standards have been computed based on a master budget activity level of 29,900 direct labor-hours per month. Actual activity for the past month was as follows: Materials used Direct labor Total factory overhead 239,000 yards at $2.55 per yard 30,200 hours at $26.20 per hour S690,000 7.400 units Required: Prepare variance analyses for the variable and fixed costs. Materials are purchased as they are used. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable· lf there is no effect, do not select either option.) Price variance Efficiency variance t labor Price variance Efficiency variance Efficiency variance Production volume variance

Explanation / Answer

hi

Answer as follows

Direct Material

Price Variance = (Selling price - Actual Price)* Actual Quantity

=(2.5-2.55)*239000= (11950)

Efficiency Variance = ( Actual Quantity - Standard Quantity)* Standard Rate

=(239000-222000)*2.5 =42500

Direct Labour

Price Variance = ( Standard Rate - Actual rate)* Actual hours

=(25-26.20)*30200

=(36240)

Efficiency Variance = (Actual Hrs - Standard Hrs) * Standard Rate

=(30200 - 29600) *25

=15000.

standard hours = 7400 units*4hrs =29600

Variable Overhead.

Efficiency Variance = (Actual hrs -Standard hrs)* standard hour rate

= (30200-29600)*60

=36000

Fixed Overhead.

Absorbed Fixed overheads - budgeted fixed overheads

= 690000 - (25+51)(7400 units)

=690000-562400

=127600

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