Question

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—1 pound plastic at $8.00 per pound		$ 8.00
Direct labor—2.0 hours at $12.15 per hour		24.30
Variable manufacturing overhead		12.00
Fixed manufacturing overhead		8.00
Total standard cost per unit		$52.30

The predetermined manufacturing overhead rate is $10.00 per direct labor hour ($20.00 ÷ 2.0). It was computed from a master manufacturing overhead budget based on normal production of 11,200 direct labor hours (5,600 units) for the month. The master budget showed total variable costs of $67,200 ($6.00 per hour) and total fixed overhead costs of $44,800 ($4.00 per hour). Actual costs for October in producing 4,300 units were as follows.

Direct materials (4,480 pounds)		$ 36,288
Direct labor (8,480 hours)		106,424
Variable overhead		61,918
Fixed overhead		25,882
Total manufacturing costs		$230,512

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Compute all of the materials and labor variances.

Total materials variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Materials price variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Materials quantity variance		$		Neither favorable nor unfavorableFavorableUnfavorable
Total labor variance		$		UnfavorableNeither favorable nor unfavorableFavorable
Labor price variance		$		UnfavorableNeither favorable nor unfavorableFavorable
Labor quantity variance		$		UnfavorableFavorableNeither favorable nor unfavorable

(b)

Compute the total overhead variance.

Total overhead variance

$

Favorable,Neither favorable nor unfavorable, Unfavorable

Answer 1

Compute all of the materials and labor variances.

Total materials variance		(4300*8-36288) = 1888		Unfavorable
Materials price variance		(8*4480-36288) = 448		Unfavorable
Materials quantity variance		(4300-4480)*8 = 1440		Unfavorable
Total labor variance		(4300*24.30-106424) = 1934		Unfavorable
Labor price variance		(12.15*8480-106424) = 3392		Unfavorable
Labor quantity variance		(8600-8480)*12.15 = 1458		Favorable

(b)

Compute the total overhead variance.

Total overhead variance

(4300*20-87800) = 1800

Unfavorable