Standards: Actual: RM – 2 pounds @ $1.00 / pound Bought 1,100 pounds for $1,155

ID: 2566503 • Letter: S

Question

Standards: Actual:

RM – 2 pounds @ $1.00 / pound Bought 1,100 pounds for $1,155

DL – 3 hours @ $6.00 / hour Used 760 pounds of RM

DL was $6,932.50 for 1,175 hours

VOH – 3 hours @ $4.00 / hour $4,650

FOH – 3 hours @ $15.00 / hour $18,100

Normal production = 400 units Actual Production = 390 units

Required – Determine the following six variances and indicate it’s “direction”.

NAME AMOUNT F / UN

1 – Raw Material Price _______________ _____

2 – Raw Material Quantity _______________ _____

3 – Direct Labor Rate _______________ _____

4 – Direct Labor Efficiency _______________ _____

5 – Variable Overhead Spending _______________ _____

6 – Fixed Overhead Spending _______________ _____

7 – Overhead Efficiency _______________ _____

8 – Overhead Volume _______________ _____

Standard price = $ 1 per pound

Actual price = $ 1,155/$ 1,100 = $ 1.05 per pound

Raw material price variance = (Standard price - Actual price) x Actual quantity

= ($ 1 – $ 1.05) x 760 = - $ 0.05 x 760 = - $ 38

Raw material price variance = ($ 38) U

Standard quantity for actual production = 2 pounds x 390 units = 780 pounds

Raw material quantity variance = (Standard quantity – Actual quantity) x Standard price

= (780 – 760) x $ 1 = 20 x $ 1 = $ 20

Raw material quantity variance = $ 20 F

Actual rate = $ 6,932.50/1,175 = $ 5.9

Direct labor rate variance = (Standard rate – Actual rate) x Actual hour

= ($ 6 - $ 5.9) x 1,175 = $ 0.10 x 1,175 = $ 117.50

Direct labor rate variance = $ 117.50 F

Standard hours for actual production = 3 hours x 390 units = 1,170 hours

Direct labor efficiency variance = (Standard hours – Actual hours) x Standard rate

= (1,170 – 1,175) x $ 6 = - 5 x $ 6 = - $ 30

Direct labor efficiency variance = ($ 30) U

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