Question

Anton Company manufactures wooden magazine stands. An accountant for Anton just completed the variance report for the current month. After printing the report, his computer’s hard drive crashed, effectively destroying most of the actual results for the month. All that the accountant remembers is that actual production was 220 stands and that all materials purchased were used in production. The following information is also available.

Current Month: Budgeted Amounts
Budgeted production: 200 magazine stands
Direct materials: Wood
Usage		3	square feet per stand
Price	$	0.25	per square foot
Direct labor:
Usage		0.5	hours per stand
Rate	$	10	per hour
Variable overhead (allocated based on direct labor hours):
Rate per labor hour	$	4
Rate per stand	$	2
Fixed overhead (allocated based on direct labor hours):
Rate per labor hour	$	6
Rate per stand	$	3
Current Month: Variances
Direct materials price variance	$	33	Unfavorable
Direct materials quantity variance		-0-
Direct labor rate variance	$	231	Favorable
Direct labor efficiency variance	$	550	Unfavorable
Overhead volume variance	$	60	Favorable
Overhead spending variance	$	210	Unfavorable

Required:

Using the budget for the current month and the variance report, construct the following items.

a. What was the actual purchase price per square foot of wood? (Round your answer to 2 decimal places.)

b. How many labor hours did it actually take to produce each stand? (Round your answer to 2 decimal places.)

c. What was the actual wage rate paid per hour? (Round your answer to 2 decimal places.)

d. What was actual total overhead for the month?

Answer 1

Material Price Variance = Actual Quantity x (Actual Price – Standard Price)

33 = 660* x (Actual Price – 0.25)

(Actual Price – 0.25) = 33/660 = 0.05

Actual Price = 0.05+0.25 = $0.30 per SQF

*Actual quantity is same as standard quantity since quantity variance is 0(220 stands x 3SQF = 660SQF)

Direct labor efficiency variance = (Actual hours – standard hours) x Standard Rate

550 = (Actual Hours – 110) x 10

(Actual Hours – 110) = 550/10 = 55

Actual Hours = 55+110 = 165 hours

*Standard hours = 220 x 0.5 hours per stand = 110 hours

Direct Labor rate variance = Actual hours x (Standard Rate – Actual Rate)

231 = 165 x (10 – Actual rate)

(10 – Actual rate) = 231/165 = 1.4

Actual rate = 10-1.4 = $8.6 per hour

Overhead spending variance = Actual overhead – Budgeted Overhead

210 = Actual Overhead – (6 x 200 x 0.5)

Actual Overhead = 210+600 = 810