Question

Given the following information:

Information	Original Budget	Actual
Units produced	1,000 units	970 units
Materials (kg)	400 kg	415 kg
Material Costs	$8,000	See other info
Direct Labour (Hours)	36,000 hours	34,010 hours
Direct Labour Costs	$385,000	$365,750
Variable Overhead Costs	$255,000	$245,000
Fixed Overhead Costs	$160,000	$165,000

Other Information

Overhead is Allocated on Direct Labour Hours

During the year, 500 kg of materials were purchased for $9,000

Beginning Inventory: 0kg

Ending Inventory: 85kg

Required:

Calculate the following variances:

1. Material Rate
2. Material Efficiency
3. Labour Price
4. Labour Efficiency
5. Variable Overhead Rate
6. Variable Overhead Efficiency
7. Fixed Overhead Rate
8. Fixed Overhead Production Volume

Answer 1

(a) . Material cost variance =(actual unit cost-standard unit cost)*actual units purchased

Auc =9000$/500=18$

Suc=8000$/500=16$

Aup=500 kg

MRV=18$-16$*500=1000$

(b)material efficiency variance

(Actual unit usage - standard unit usage) *standard cost per unit

(415-85)-400*16=70*16

=1120

(C) (AH*AR) - (AH*SR)

AR= 385000$/36000=10.69

SR =365750$/34010=10.75

=(34010*10.69)-(34010*10.75)

=363567-365607

=2040

d) (SH-AH) *SR

=( 36000-34010)*10.75

=21392.5

E) 245000$-255000$=10000$

(AVO-SVO)/AH=10000/34010

F)(actual Labour hours-budgeted Labour hours) *hourly rate for standard variable over head

=(34010-36000)*7.083

=14095

g) 165000$/34010 - 160000/36000

=4.85-4.4

=0.45

h)fixed production cost budgted-fixed production cost absorbed =5000$