One question Grub Chemical Company has developed cost standards for the producti

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One question

Grub Chemical Company has developed cost standards for the production of its new cologne, ChocO. The variable cost standards below relate to each 10 gallon batch of ChocO: Milk chocolate (2 pounds @ $0.85 per pound!..... Direct labour (1.25 hours @$12.00 per hour Variable overhead (1.25 hours @ $44.00 per hour ). Standard Cost Per Batch $ 1.70 $15.00 $55.00 Variable manufacturing overhead at Grub is applied based on direct labour hours. The actual results for last month were as follows: Number of batches produced. Direct labour hours incurred Pounds of chocolate purchased..9,000 Pounds of chocolate used in production... 7,880 Cost of chocolate purchase$7,200 Direct labour cost. 3,800 4,510

Explanation / Answer

a Materials price variance = 7200-(9000*0.85)= 450 Favorable b Materials quantity variance = 0.85*(7880-3800*2)= 238 Unfavorable c Labour rate variance = 53218-(4510*12)= 902 Favorable d Variable overhead efficiency variance = 44*(4510-3800*1.25)= 10560 Favorable

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