Question

1)

Pardoe Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity	Standard Price or Rate	Standard Cost
Direct materials	1.5 pounds	$3.00 per pound	$4.50
Direct labor	0.6 hours	$6.00 per hour	$3.60
Variable manufacturing overhead	0.6 hours	$1.25 per hour	$0.75

During March, the following activity was recorded by the company:

• The company produced 3,000 units during the month.
• A total of 8,000 pounds of material were purchased at a cost of $23,000.
• There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of material remained in the warehouse.
• During March, 1,600 direct labor-hours were worked at a rate of $6.50 per hour.
• Variable manufacturing overhead costs during March totaled $1,800.

The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for March is:

$200 U

$600 U

$600 F

$200 F

2)

Pardoe Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity	Standard Price or Rate	Standard Cost
Direct materials	1.5 pounds	$3.00 per pound	$4.50
Direct labor	0.6 hours	$6.00 per hour	$3.60
Variable manufacturing overhead	0.6 hours	$1.25 per hour	$0.75

During March, the following activity was recorded by the company:

• The company produced 3,000 units during the month.
• A total of 8,000 pounds of material were purchased at a cost of $23,000.
• There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of material remained in the warehouse.
• During March, 1,600 direct labor-hours were worked at a rate of $6.50 per hour.
• Variable manufacturing overhead costs during March totaled $1,800.

The direct materials purchases variance is computed when the materials are purchased.

The variable overhead efficiency variance for March is:

$1,050 U

$250 U

$1,050 F

$250 F

3)

Eliezrie Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	6.5 kilos	$1.00 per kilo	$6.50
Direct labor	0.3 hours	$10.00 per hour	$3.00
Variable overhead	0.3 hours	$4.00 per hour	$1.20

In January the company's budgeted production was 7,400 units but the actual production was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct labor-hours to produce this output. During the month, the company purchased 48,500 kilos of the direct material at a cost of $53,350. The actual direct labor cost was $18,473 and the actual variable overhead cost was $7,714.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor rate variance for January is:

$2,025 F

$1,827 F

$1,827 U

$2,025 U

4)

Galla Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	8.2 pounds	$7.00 per pound	$57.40
Direct labor	0.4 hours	$20.00 per hour	$8.00
Variable overhead	0.4 hours	$2.00 per hour	$0.80

The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor efficiency variance for June is:

$400 F

$384 F

$400 U

$384 U

Answer 1