Question

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

Inputs	(1) Standard Quantity or Hours		(2) Standard Price or Rate			Standard Cost (1) × (2)
Direct materials	2.30	pounds	$	17.10	per pound	$	39.33
Direct labor	1.00	hours	$	15.90	per hour	$	15.90
Variable manufacturing overhead	1.00	hours	$	9.30	per hour	$	9.30
Total standard cost per unit						$	64.53

	Total		Variances Reported
	Standard Cost*		Price or Rate			Quantity or Efficiency
Direct materials	$	786,600	$	13,920	F	$	34,200	U
Direct labor	$	318,000	$	4,200	U	$	15,900	U
Variable manufacturing overhead	$	186,000	$	4,400	F	$	?†	U

*Applied to Work in Process during the period.

The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

Required:

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

6. How much actual variable manufacturing overhead cost was incurred during the period?

Answer 1

4). Direct labour efficiency variance = (Std hrs for actual production - Actual hrs)*Std rate per hour
Std hrs for actual production = 318000 / 15.90 = 20000 hrs
Direct labour efficiency variance = (20000 - Actual hrs)*15.90 = 15900 U
20000 - Actual hrs = -15900/15.90
20000 - Actual hrs = -1000
Actual hrs worked = 21000 hrs

5). Direct labour rate variance =(std rate - Actual hrs) * Actual hrs
(15.90 - Actual rate ) *21000 hrs = 4200 U
15.90 - Actual rate = -0.2
Actual rate = 16.1 per hour

6). Variable overhead expenditure variance = Budgeted variable overhead for actual hours - Actual variable overhead
Budgeted variable overhead for actual hours = 21000 hrs * 9.3 = 195300
Variable overhead expenditure variance = 195300 - Actual variable overhead = 4400 F
Actual variable overhead = 195300 - 4400 = $190900