Question

Nyman Painting Contractors specializes in providing painting services to support residential remodeling projects. Nyman bids jobs based on the following cost assumptions:

1 gallon of paint will cover 450 square feet of interior wall space. 300 square feet can be painted in 1 hour.
1 gallon of paint costs $25.
1 hour of direct labor costs $17.

The Sanchez residence was recently repainted. The job consisted of 18,000 square feet of interior wall space. Nyman received a $1 per gallon discount, and a total of $984 was expended for paint. Nyman paid $1,107 for direct labor. The painters took exactly 61.5 hours to paint the residence.

1- Calculate variances for direct material and direct labor.

Mantuach Printing is a highly automated printing company. Mantuach allocates factory overhead based on machine hours.

During a recent month, 310 machine hours were worked. These machine hours resulted in the production of 30,000 books. The production standards have an objective of 100 books per machine hour.

Facts about budgeted and actual factory overhead are as follows:

Actual total variable factory overhead for the month was $250,000.
Variable factory overhead was estimated and applied at $800 per machine hour. Actual total fixed factory overhead for the month was $120,000.
Fixed factory overhead was estimated and applied at $450 per machine hour.

Mantuach based the fixed overhead allocation rates on an assumed production level of 28,000 books.

2- Calculate the overhead variances.

Answer 1

1) Direct Material Price Variance = ( Standard price per unit - Actual Price per unit) x Actual material purchased

= ( 25 - 24 ) x 41 = $ 41 F

Direct Material Quantity Variance = ( Standard Quantity for Actual Output - Actual Quantity Used ) x Standard Rate per Unit = ( 40 - 41) x 25 = $ 25 U

Direct labor rate variance = ( Standard Rate per Hour - Actual Rate per Hour ) x Actual Hours Used = ( 17 - 18) x 61.5 = $ 61.50 U

Direct Labor Effficiency Variance = ( Standard Hours for Actual Output - Actual Hours Used) x Standard Rate per Hour = ( 60 - 61.50 ) x 17 = $ 25.50 U

2) Variable overhead spending variance = 310 x $ 800 - $ 250,000 = $ 2,000 U

Fixed Overhead Spending Variance = 450 x 300 - 120,000 = $ 15,000 F