Fastic Corporation makes a product with the following standard costs: Inputs Sta
ID: 2587942 • Letter: F
Question
Fastic Corporation makes a product with the following standard costs:
Inputs
Standard Quantity or hours
Standard Price or Rate
Standard Cost Per Unit
Direct materials
6.9 liters
$ 5 .00 per liter
$ 34.50
Direct labor
0.3 hours
$ 17.00 per hour
$5.10
Variable overhead
0.3 hours
$ 6.00 per hour
$1.80
The company reported the following results concerning this product in August.
Originally Budgeted output
8,6000 units
Actual output
8,400 units
Raw materials used in production
58,330 liters
Actual direct labor-hours
2,310 hours
Purchases of raw materials
62,500 liters
Actual price of raw materials
$ 4.90 per liter
Actual direct labor rate
$ 17.10 per hour
Actual variable overhead rate
$ 5.50 per hour
The materials price variance is recognized when materials are purchased. Variable overhead is applied on the basis of direct labor-hours.
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
Inputs
Standard Quantity or hours
Standard Price or Rate
Standard Cost Per Unit
Direct materials
6.9 liters
$ 5 .00 per liter
$ 34.50
Direct labor
0.3 hours
$ 17.00 per hour
$5.10
Variable overhead
0.3 hours
$ 6.00 per hour
$1.80
Explanation / Answer
Materials quantity variance=5*(58330-8400*6.9)= 1850 U b Materials price variance=62500*(4.9-5)= 6250 F c Labor efficiency variance=17*(2310-8400*0.3)= 3570 F d Direct labor rate variance=2310*(17.1-17)= 231 U
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