2. Schlager Corporation makes a product with the following standard costs: Input

Question

2. Schlager Corporation makes a product with the following standard costs: Inputs Direct materials Direct labor Variable overhead Standard Quantity or Hours 7.8 kilos 0.4 hours 0.4 hours Standard Price or Rate S1.00 per kilo S18.00 per hour S3.00 per hour The company reported the following results concerning this product in August. Actual output Raw materials used in production Purchases of raw materials Actual direct labor-hours Actual cost of raw materials purchases Actual direct labor cost 8,500 units 65,550 kilos 69,000 kilos 3,410 hours $75,900 S66,495 $9,889 .. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased Required: a. Compute the materials quantity variance b. Compute the materials price variance c. Compute the labor efficiency variance d. Compute the direct labor rate variance e. Compute the variable overhead efficiency variance f. Compute the variable overhead rate variance

Explanation / Answer

Ans. A Material quantity variance   = (AQ - SQ) * SP (65550 - 66300) * 1.00 (-750) * 1 750 F *SQ =   Actual output * Direct material rate 8500 * 7.8 66300 Ans.b Material Price Variance   = (AQ * AP) - (AQ * SP) 75900 - (69000 * 1.00) 75900 - 69000 6900 U AQ * AP = ACTUAL COST = 75900 (given) Ans. C Labor efficiency variance = (Actual hours - standard hours) * standard rate (3410 - 3400) * 18 10 * 18 180U *Standard hours = Output * hours rate per unit 8500 * 0.4 hours 3400 Ans. D Labor rate variance = (AH * AR) - (AH * SR) 66495 - (3410 * 18) 66495 - 61380 5115 U Ans. E Variable overhead efficiency variance = (AH - SH) * SR (3410 - 3400) * 3 10 * 3 30 U *SH = Output * hours rate per unit 8500 * 0.4 hours 3400 Ans. F Variable overhead rate variance   = (AH * AR) - (AH * SR) 9889 - (3410 * 3) 9889 - 10230 341F *Variable overhead cost = AH* AR = 9889 (given)

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