Question

1)

Aday's Frozen Food Favorites makes frozen dinners. They set the following standards for the production of 40,000 units:

Standard Quantity	24,800	lbs
Standard Price	$1.14	per lb
Standard Labor Hours	4,500	hours
Standard Labor Rate	$5.25
Standard Overhead Rate	$0.25	per hour

During the last period, Aday produced 56,000 units and recorded the following production information:

Actual Quantity Used	36,200	lbs
Actual Total Cost	$43,440	for 36,200 lbs
Actual Labor Hours	7,000	hours
Actual Payroll	$37,800
Actual Overhead Costs	$2,400

Using the information above, calculate the following:

Labor Efficiency Variance

Select one:

a. 650

b. 175.00

c. 1,050.00

d. 3,675.00

2)

Aday's Frozen Food Favorites makes frozen dinners. They set the following standards for the production of 40,000 units:

Standard Quantity	24,800	lbs
Standard Price	$1.14	per lb
Standard Labor Hours	4,500	hours
Standard Labor Rate	$5.25
Standard Overhead Rate	$0.25	per hour

During the last period, Aday produced 56,000 units and recorded the following production information:

Actual Quantity Used	36,200	lbs
Actual Total Cost	$43,440	for 36,200 lbs
Actual Labor Hours	7,000	hours
Actual Payroll	$37,800
Actual Overhead Costs	$2,400

Using the information above, calculate the following:

Overhead Spending Variance

Select one:

a. 650

b. 175.00

c. 1,050.00

d. 3,675.00

3)

Aday's Frozen Food Favorites makes frozen dinners. They set the following standards for the production of 40,000 units:

Standard Quantity	24,800	lbs
Standard Price	$1.14	per lb
Standard Labor Hours	4,500	hours
Standard Labor Rate	$5.25
Standard Overhead Rate	$0.25	per hour

During the last period, Aday produced 56,000 units and recorded the following production information:

Actual Quantity Used	36,200	lbs
Actual Total Cost	$43,440	for 36,200 lbs
Actual Labor Hours	7,000	hours
Actual Payroll	$37,800
Actual Overhead Costs	$2,400

Using the information above, calculate the following:

Overhead Efficiency Variance

Select one:

a. 650

b. 175.00

c. 1,050.00

d. 3,675.00

Answer 1

1.

Labor efficiency variance = (Standard hours - Actual hours) * Standard rate

Standard hours = 4,500 / 40,000 * 56,000 = 6,300 hours

Labor efficiency variance = (6,300 - 7,000) * $5.25

Labor efficiency variance = $3,675 Unfavorable

Hence option d is correct.

2.

Overhead spending variance = (Standard rate - Actual rate) * Actual hours

Actual rate = $2,400 / 7,000 = $0.3428

Overhead spending variance = ($0.25 - $0.3428) * 7,000 = $650

Hence option a is correct.

3.

Overhead efficiency variance = (Standard hours - Actual hours) * Standard rate

Overhead efficiency variance = (6,300 - 7,000) * $0.25 = $175

Hence option b is correct.