Question

Requirement: 1

Majer Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.4	ounces	$	3.00	per ounce	$	19.20
Direct labor		0.7	hours	$	19.00	per hour	$	13.30
Variable overhead		0.7	hours	$	3.00	per hour	$	2.10

The company reported the following results concerning this product in February.

Originally budgeted output		4,700	units
Actual output		5,200	units
Raw materials used in production		30,400	ounces
Actual direct labor-hours		1,820	hours
Purchases of raw materials		32,800	ounces
Actual price of raw materials	$	87.10	per ounce
Actual direct labor rate	$	77.60	per hour
Actual variable overhead rate	$	6.00	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 materials quantity variance for February is:

Requirement: 2

Majer Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		3.0	ounces	$	5.50	per ounce	$	16.50
Direct labor		0.8	hours	$	11.50	per hour	$	9.20
Variable overhead		0.8	hours	$	4.00	per hour	$	3.20

The company reported the following results concerning this product in February.

Originally budgeted output		6,000	units
Actual output		5,800	units
Raw materials used in production		17,400	ounces
Actual direct labor-hours		4,840	hours
Purchases of raw materials		19,000	ounces
Actual price of raw materials	$	5.25	per ounce
Actual direct labor rate	$	13.20	per hour
Actual variable overhead rate	$	4.70	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 materials price variance for February is:

Requirement: 3

Majer Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.1	ounces	$	2.00	per ounce	$	12.20
Direct labor		0.7	hours	$	12.00	per hour	$	8.40
Variable overhead		0.7	hours	$	2.00	per hour	$	1.40

The company reported the following results concerning this product in February.

Originally budgeted output		5,400	units
Actual output		5,700	units
Raw materials used in production		33,100	ounces
Actual direct labor-hours		2,030	hours
Purchases of raw materials		35,500	ounces
Actual price of raw materials	$	17.10	per ounce
Actual direct labor rate	$	7.60	per hour
Actual variable overhead rate	$	5.30	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 variable overhead efficiency variance for February is:

Answer 1

1

Materials quantity variance = Standard price*(Actual quantity used-Standard quantity)

Materials quantity variance = 3*(30400-5200*6.4)= $8640 F

2

Materials price variance for February = Actual quantity purchased*(Actual price-Standard price)

Materials price variance for February = 19000*(5.25-5.50)= $4750 F

3

Variable overhead efficiency variance = Standard rate*(Actual hours-Standard hours)

Variable overhead efficiency variance = 2.00*(2030-5700*0.7)= $3920 F