Problem 2: Peaceful Corporation manufactures figurines based on the following in

Question

Problem 2:

Peaceful Corporation manufactures figurines based on the following information.

Required:

Standard costs $20

• Materials (4 ounces at $5)

$8

• Direct labor (1 hour per unit)

$4

• Variable overhead (based on direct labor hours)

Fixed overhead budget $19,000 Actual results and costs

• Materials purchased

• Units

9,000

• Cost

$39,600 Materials used in production

• Finished product units

2,000

• Raw material (ounces)

8,200

• Direct labor hours

2,000

• Direct labor cost

$20,000

• Variable overhead costs

$5,980

• Fixed overhead costs

$19,500

Explanation / Answer

Material usage variance = (Actual Quantity - Standard Quantity) x Standard Price

=(8200-4*2000)*5 =1000 unfavourable

Labour Rate Variance = Actual Quantity x Actual Rate ? - ? Actual Quantity x Standard Rate

= 20000-2000*8 =4000 unfavourable

Labour Effieciency Variance = Actual Hours x Standard Rate ? - ? Standard Hours x Standard Rate -

= 2000*8 -2000*8 =0

Variable Overhead spending Variance = Actual Manufacturing Variable Overheads Expenditure - Actual hours ? x ? Standard Variable Overhead Rate per hour

= 5980 -2000*4 = 2020 Favourale

Variable Overhead Efficiency Variance = Standard hours ? x ? Standard Variable Overhead Rate per hour - Actual hours ? x ? Standard Variable Overhead Rate per hour

= 2000* 4 -2000*4 = 0

Fixed Overhead Budget Variance = Actual Cost - Standard Cost= 19500-19000 - 500 unfavourable

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