Question

Colavita Co. uses a standard cost system for its single product. Variable overhead is applied on the basis of direct labor hours. The following information is given:

Standard costs per unit:

Raw materials (1.5 grams x $16 per gram	$24.00
Direct Labor (0.75 hours x $8 per hour)	$6.00
Variable Overhead (0.75 hours x $3 per hour)	$2.25

Actual experience for current year:

Units produced	22,400	units
Purchases of raw materials (21,000 grams x $17 per gram	$357,000
Raw materials used	33,400	grams
Direct labor (16,750 hours x $8 per hour)	$134,000
Variable overhead cost incurred	$48,575

Required:

Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase: Indicate if the variance is F or U or NA. (Input your answer in whole dollars, using commas when needed, with no dollar signs and no decimals.)

Variance	Amount	Favorable (F) or Unfavorable (U) or NA
Direct materials price
Direct materials quantity
Direct labor rate
Direct labor efficiency
Variable overhead rate
Variable overhead efficiency

Answer 1

Material price variance = (Standard price - actual price)*actual quantity purchased

= (16-17)*21000 = $21,000 Unfavorable

Material quantity variance = (Standard quantity - actual quantity used)*standard rate

= (22400*1.50-33400)*16 = $3,200 Favorable

Labor rate variance = (Standard rate per hour - Actual rate per hour)*Actual hours worked

= ($8-$8)*16750

= $0 NA

Labor time variance = (Standard hours allowed - Actual hours worked )*Standard rate per hour

= (22400*0.75-16750)*8

= $400 Favorable

Variable overhead spending variance = (standard rate - actual rate)*actual hours

= (3-48,575/16750)*16750

= $1,675 Favorable

Variable overhead efficiency variance = (standard hours - actual hours)*standard rate

= (22400*0.75-16750)*3

= $150 Favorable