Topline Surf Boards manufactures a single product. The standard cost of one unit

Question

Topline Surf Boards manufactures a single product. The standard cost of one unit of this product is as follows: During October, 5,600 units were produced. Selected data relating to the month?s production follow: There was no beginning inventory of raw materials. The variable manufacturing overhead rate is based on direct labor-hours. Required: 1. For direct materials: a. Compute the price and quantity variances for October. (Input all amounts as positive values. Leave no cells blank - be certain to enter O wherever required. Indicate the effect of each variance by selecting F for favorable, U for unfavorable, and None for no effect (i.e., zero variance). Omit the $ sign in your response.)

Explanation / Answer

1

a)

1) Materials price variance = (Actual price - Standard Price) *Actual Quantity

Materials price variance = (0.85 - 0.90 )*63000

Materials price variance = $ 3150 Unfavorable

2). Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price

Materials usage/quantity variance = (38500 -5600*5)*0.90

Materials usage/quantity variance = $ 9450 Unfavorable

b)

2

a)

Variable Overhead efficiency variance =(Actual Direct Labor Hour-Standard Direct Labor Hour )Standard Rate

1400 = (Actual Direct Labor Hour-5600*1)*2.80

Actual Direct Labor Hour = 1400/2.80 + 5600

Actual Direct Labor Hour = 6100

1) Labor rate variance = (Actual Rate-Standard Rate)*Actual Hour

Labor rate variance = (26840/6100 - 5.10)*6100

Labor rate variance = $ 4270 Favorable

2) Labor efficiency variance = (Actual Hour-Standard Hour )Standard Rate

Labor efficiency variance = (6100-5600)*5.10

Labor efficiency variance = 2550 Unfavorable

b)

General Journal Debit Credit Raw Material 56700 Material Price Variance 3150 Accounts Payable 53550 Work in Process 25200 Material Quantity Variance 9450 Raw Material 34650

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