Question

Lime Corporation makes a product with the following standard costs: Input Standard Quantity or Hours Standard...

Lime Corporation makes a product with the following standard costs:

Input

Standard Quantity or Hours

Standard Price or Rate

Standard Cost Per Unit

Direct materials

9.5 grams

$6.00 per gram

$57.00

Direct labor

0.5 hours

$23.00 per hour

$11.50

Variable overhead

0.5 hours

$2.00 per hour

$1.00

In November the company's budgeted production was 3,000 units but the actual production and sales was 2,800 units. The company used 27,670 grams of the direct material and 1,390 direct labor-hours to produce this output. During the month, the company purchased 31,400 grams of the direct material at a cost of $198,920. The actual direct labor cost was $29,607 and the actual variable overhead cost was $2,502.

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

Required: Calculate the following variances for November:

a. Material price variance.

b. Material quantity variance.

c. Direct labor efficiency variance.

d. Direct labor rate variance.

e. Variable overhead efficiency variance.

Business   Accounting   
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Homework Answers

Answer #1
Standard Cost Sheet PU
Component Qty Rate Price A Material Price Variance:
Direct Material 9.5 6.00 57.00 (SP-AP)Actual Qty Purchased
Direct Labor 0.5 23.00 11.50 (6-6.34)*31400
Variable OH 0.5 2.00 1.00 -10520 A
69.50
Actual Cost B Material Usage Variance:
Component Qty Rate Price (Standard Qty-Actual Qty Used)Standard Cost
Direct Material 31400 6.34 198920 (26600-27670)*6
Direct Labor 1390 21.30 29607 -6420 A
Variable OH 1390 1.80 2502 -39,320.00
Total 231029 2,593.00 C Labor Price Variance:
298.00 (SP-AP)Actual Hours
Standard Cost (2800) (23-21.30)*1390
Component Qty Rate Price 2363
Material 26600 6.00 159600
Labor 1400 23.00 32200 D Labor Eff Variance:
VOH 1400 2.00 2800 (Standard Hours-Acual Hours)St. Price
Total 194600 (1400-1390)*23
230 F
Material Purchased 31400 E VOH Eff Variance:
Total Purchase Value 198920 (Standard Hours-Acual Hours)St. Price
Material Cost PU 6.34 (1400-1390)*2
20 F
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