Need help on this problem guys this one is really stumping me! Much appreciated!

Question

Need help on this problem guys this one is really stumping me! Much appreciated!! ID: A Krane Company has a standard costing system and keeps all its costs up to date. The company's main product is beach towels which are made in a single department. The standard variable costs for one beach towel (unit) are as follows 10. Direct materials (3 yards at $1.00 per yard) Direct labor (1/2 hour at $9.00 per hour) Variable overhead (1/2 hour@ $5.00 per direct labor hour) Standard variable cost per unit 4.5 The company's normal capacity is 10,000 direct labor hours. Its budgeted fixed overhead costs for the year were $24,000. During the year, it produced and sold 22,000 beach towels and it purchased 66,250 yards of direct materials; the purchase cost was $0.99 per yard. The average labor rate was $9.10 per hour, and 10,900 direct labor hours were worked. The company's actual variable overhead costs for the year were $55,100, and its fixed costs were $24,500. Using the data given, compute the following using formulas or diagram form: 1. Direct materials cost variances: a. Direct materials price variance b. Direct materials quantity variance c. Total direct materials cost variance

Explanation / Answer

1. a. Direct Materials Price Variance = ( Standard rate per unit - Actual rate per unit ) x Quantity Purchased = $ ( 1.00 - 0.99) x 66,250 = $ 662.50 Favorable.

b. Direct Materials Quantity Variance = ( Standard Qty. for Actual Output - Actual Qty. used ) x Standard Rate per unit = ( 3 x 22,000 - 66,250) x $ 1.00 = $ 250 Unfavorable.

c. Direct Materials Cost Variance = $ 662.50 - $ 250 = $ 412.5 Favorable.

2. a. Direct Labor Rate Variance = ( Standard Labor Hour Rate - Actual Labor Hour Rate) x Labor Hours Used = $ ( 9.00 - 9.10) x 10,900 = $ 1,090 Unfavorable.

b. Direct Labor Efficiency Variance = ( Standard Hours for Actual Output - Actual Labor Hours Used) x Standard Labor Hour Rate = ( 1/2 x 22,000 - 10,900) x $ 9.00 = $ 900 Favorable.

c. Total Direct Labor Cost Variance = $ ( 1,090) + $ 900 = $ 190 Unfavorable.

3. a. Variable Overhead Spending Variance = ( $ 5.00) - $ 55,100/10,900) x 10,900 = $ 600 Unfavorable.

b. Variable Overhead Efficiency Variance = ( Standard Hours for Actual Output - Actual Hours Used) x Standard Rate per Hour = ( 11,000 - 10,900 ) x $ 5.00 = $ 500 Favorable.

c. Total Variable Overhead Variance = $ 500 - $ 600 = $ 100 Unfavorable.

4. a. Fixed Overhead Budget Variance = $ 24,000 - $ 24,500 = $ 500 Unfavorable.

b. Fixed Overhead Volume Variance = $ 24,000 x 10,900 / 10,000 - $ 24,000 = $ 2,160 Favorable.

c. Total Fixed Overhead Variance = $ 2,160 - $ 500 = $ 1,660 Favorable.

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