Question

Kropf Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate Direct materials 7.80 liters $ 7.40 per liter Direct labor 0.40 hours $ 25.70 per hour Variable manufacturing overhead 0.40 hours $ 6.30 per hour The company has reported the following actual results for the product for September: Actual output 10,000 units Raw materials purchased 78,500 liters Actual cost of raw materials purchased $ 586,500 Raw materials used in production 78,020 liters Actual direct labor-hours 3,800 hours Actual direct labor cost $ 100,302 Actual variable overhead cost $ 20,314 Required: a. Compute the materials price variance for September. b. Compute the materials quantity variance for September. c. Compute the labor rate variance for September. d. Compute the labor efficiency variance for September. e. Compute the variable overhead rate variance for September. f. Compute the variable overhead efficiency variance for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Direct Material price variance = (standard rate – actual rate)*Actual quantity purchased

= (7.40 – Actual rate)*78500

= 7.40*78500 – 586500

= $5,600 Unfavorable

Material quantity variance = (Standard quantity – actual quantity used)*standard rate

= (7.80*10,000 – 78020)*7.40

= $148 Unfavorable

Labor rate variance = (standard rate – actual rate)*Actual hours

= (25.70 – Actual rate)*3800

= 25.70*3800 – 100302

= $2642 U

Labor efficiency variance = (Standard hours – actual hours)*Standard rate

= (0.4*10,000 – 3800)*25.70

= $5140 F

Variable overhead rate variance = (standard rate – actual rate)*Actual hours

= (6.30 – Actual rate)*3800

= $3626 F

Variable overhead efficiency = (4000-3800)*6.30

= $1260 F