Question

6-25 Comprehensive variance calculations (LO 2, 4, 6, 7) Carson Construction Consultants performs cement core tests in its Greenville laboratory. The following standard costs for the tests have been developed by the company's controller, Landon Carson, based on performing 2,100 core tests per month.

	Standard Price	Standard Quantity	Standard Cost
Direct materials	$0.50 per pound	4 pounds	$ 2.00
Direct labor	$10 per DLH	.5 DLH	5.00
Variable overhead	$9 per DLH	.5 DLH	4.50
Fixed overhead	$16 per DLH	.5 DLH	8.00
Total standard cost per test			$19.50

At the end of March, London reported the following operational results:

•The company actually performed 2,250 core tests during the month.

•8,500 pounds of direct materials were purchased during the month at a total cost of $5,600.

•6,300 pounds of direct materials were used to conduct the core tests.

•850 direct labor hours were worked at a total cost of $9,775.

•Actual variable overhead was $7,800.

•Actual fixed overhead was $15,750.

Required

a.Calculate the direct materials price variance for March.

b.Calculate the direct materials quantity variance for March.

c.Calculate the direct labor rate variance for March.

d.Calculate the direct labor efficiency variance for March.

e.Calculate the variable overhead spending variance for March.

f.Calculate the variable overhead efficiency variance for March.

g.Calculate the fixed overhead spending variance for March.

h.Prepare a memo to Landon Carson providing possible explanations for the direct materials and direct labor variances.

Answer 1

a.	Material Price Variance	$1,360	unfavorable
b.	Material Quantity Variance	$1,350	favorable
	Workings:
	Material Price Variance =	(Standard Price - Actual Price) * Actual Quantity
	=	[$0.50 - $0.66] * 8,500 pounds
	=	$1,360	unfavorable
	Material Quantity Variance =	(Standard Quantity - Actual Quantity ) * Standard Rate
	=	[(9,000 - 6,300] * $0.50
	=	$1,350	favorable
c.	Labor Price Variance	$1,275	unfavorable
d.	Labor Quantity Variance	$2,750	favorable
	Workings:
	Direct labor rate variance =	(Standard Rate - Actual Rate) * Actual hours
	=	[$10.00 per hr. - $11.50 per hr.] * 850 DLHs
	=	$1,275	unfavorable
	Direct labor efficiency variance =	(Standard hours - Actual hours) * Standard Rate
	=	[1,125 - 850] * $10.00
	=	2750	favorable