Sparty Gear, Inc. manufacturers canvas tents for tailgating. The company uses a

Question

Sparty Gear, Inc. manufacturers canvas tents for tailgating. The company uses a standard costing system and applies overhead on the basis of direct labor hours. Sparty Gear provides the following information about this product:

There are a total of eight questions below, each worth 0.5 points. Carry your answers to four decimal places.

1. Calculate direct material variances. Enter as a positive if favorable and negative if unfavorable.

a. Direct material price variance:

b. Direct material quantity variance:

2. Calculate direct labor variances. Enter as a positive if favorable and a negative if unfavorable.

a. Direct labor rate variance:

b. Direct labor efficiency variance:

3. Calculate variable manufacturing overhead (MOH) variances. Enter as a positive if favorable and negative if unfavorable.

a. Variable MOH rate variance:

b. Variable MOH efficiency variance:

4. Calculate fixed manufacturing overhead (MOH) variances. Enter as a positive if favorable and negative if unfavorable.

a. Fixed overhead budget variance:

b. Fixed overhead volume variance:

Standards: Direct material 21.0 yards of canvas per tent at $12.00 per yard Direct labor 4.0 hours per tent at $12.00 per hour Variable manufacturing overhead (MOH) standard rate $4.60 per direct labor hour Predetermined fixed MOH standard rate $10.20 per direct labor hour Total budgeted fixed MOH cost $81,100

Explanation / Answer

Solution:

Material Price Variance

Material Price Variance is the variance arises in the material cost due to difference in actual material purchase price from standard material price. Mathematically, it is calculated as below:

Material Price Variance = Actual Quantity (Standard Price – Actual Price)

Note --- Here actual quantity means actual quantity of material PURCHASED. If the question does not provide the information about material purchase, it is taken as equal to material consumed.

(1-a)

Direct Material Price Variance

Actual Price (AP) (647,550 / 43480 )

14.89305

per yard

Standard Price (SP)

$12.00

per yard

Variance or Difference in Price (AP-SP)

$2.89

per yard

x Actual Quantity PURCHASED

43480

Yards

Material Price Variance

$125,790

Unfavorable

1-b)

Material Quantity/Efficiency/Usage Variance

Material Efficiency (Usage) Variance measures variance in material cost due to usage/consumption of materials. It is calculated as below:

Material Quantity Variance = Standard Price (Standard Quantity for Actual Production – Actual Quantity USED)

Note --- Here actual quantity means actual quantity of material CONSUMED/USED

1-b)

Direct Material Quantity Variance

Standard Quantity Allowed for actual production:

Actual Production

2100

tents

x Allowed Standard Quantity Per Unit

21

yards

Total Standard Quantity Allowed for actual production (SQAP)

44100

yards

Actual Quantity USED (AQU)

38800

yards

Variance or Difference in Quantity (SQAP - AQU)

5300

yards

x Standard Price (SP)

$12

per yard

Material Quantity Variance

$63,600

Favorable

2-a)

Labor Rate Variance

Actual Hourly Rate (AHR) ($81,056 / 8090 hours)

$10.0193

Standard Hourly Rate (SHR)

$12

Variance or Difference in Rate (AHR - SHR)

$2

x Actual Labor Hours

8090

Labor Rate Variance

$16,024

Favorable

2-b)

Labor Efficiency Variance

Standard Hours Allowed for actual production:

Actual Production

2100

tents

x Allowed Standard Hours Per Unit

4

hours

Total Standard Hours Allowed for actual production (SHAP)

8400

hours

Actual Labor Hours Worked (AH)

8090

hours

Variance or Difference in Quantity (SHAP - AH)

310

x Standard Hourly Rate (SHR)

$12

per hour

Labor Efficiency Variance

$3,720

Favorable

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining part.

(1-a)

Direct Material Price Variance

Actual Price (AP) (647,550 / 43480 )

14.89305

per yard

Standard Price (SP)

$12.00

per yard

Variance or Difference in Price (AP-SP)

$2.89

per yard

x Actual Quantity PURCHASED

43480

Yards

Material Price Variance

$125,790

Unfavorable

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