XO-20 is an oil-based product used to remove rust on bolts and nuts that are stu
ID: 2578275 • Letter: X
Question
XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.50-liter can of solution call for 0.72 liters of material and 4 hours of labor. (0.72 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.40. The standard cost per hour for labor is $14.00. Overhead is applied at the rate of $14.72 per can. Expected production is 8,500 cans with fixed overhead per year of $20,570 and variable overhead of $12.30 per unit (a 0.50-liter can).
During 2018, 7,000 cans were produced; 13,500 liters of material were purchased at a cost of $63,450; 9,600 liters of material were used in production. The cost of direct labor incurred in 2018 was $399,300, based on an average actual wage rate of $11 per hour. Actual overhead for 2018 was $136,400.
Calculate material, labor, and overhead variances. (Round intermediate calculations to 2 decimal places, e.g. 14.37 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)
Material Price Variance Material Quantity Variance Labor Rate Variance 108900 Favorable Labor Efficiency Variance 116200 Favorable Controllable Overhead Variance Overhead Volume Variance FavorableExplanation / Answer
1. Actual price of materials = $63450/ 13500 = $4.70
Standard price = $2.40
Material price variance = (SP-AP) x AQ purchased
= ($2.40 - $4.70) x 13500
= $31050 U
2. Standard quantity = 0.72/ 0.50 x (7000 x 0.50) = 5040
Material quantity variance = (SQ - AQ used) x SP
= (5040 - 9600) x $2.40
= $10944 U
3. Labor efficiency variance = (SH - AH) x SR
= [28000 - (399300/ 11)] x $14
= 116200 U
4. Standard hours allowed = 4/ 0.50 x (7000 x 0.50) = 28000 hours
Budgeted allowance based on standard hours allowed:
Overhead controllable variance = Actual factory overhead - Budgeted Allowance Based on Standard Hours Allowed
= $136400 - $106670
= $29730 U
5. Overhead charged to production = $14.72 x 7000 = $103040
Overhead volume variance = Budgeted Allowance Based on Standard Hours Allowed - Overhead charged to production
= $106670 - $103040
= $3630 U
Fixed expenses budgeted $20570 Variable expenses (12.30 x 7000) 86100 $106670Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.