Question

VSB 3006 – Dr. JME

Handout - Standards

Standards:                                           Actual:

RM – 2 pounds @ $1.00 / pound           Bought 1,100 pounds for $1,155

DL – 3 hours @ $6.00 / hour               Used 760 pounds of RM

DL was $6,932.50 for 1,175 hours

VOH – 3 hours @ $4.00 / hour            $4,650

FOH – 3 hours @ $15.00 / hour           $18,100

Normal production = 400 units             Actual Production = 390 units

Required – Determine the following six variances and indicate it’s “direction”.

          NAME                                        AMOUNT                        F / UN

1 – Raw Material Price                          _______________        _____

2 – Raw Material Quantity                   _______________        _____

3 – Direct Labor Rate                          _______________        _____

4 – Direct Labor Efficiency                 _______________        _____

5 – Variable Overhead Spending          _______________        _____

6 – Fixed Overhead Spending             _______________        _____

7 – Overhead Efficiency                      _______________        _____

8 – Overhead Volume                           _______________        _____

Answer 1

Raw material price variance:

= AQ*AP - AQ*SP

=760*(1155/1100)-760*1

=38

Unfavourable

Raw material Quantity variance:

= AQ*SP - SQ*SP

=(760*1)-((390*2)*1)

=-20

Favourable

Direct Labour rate variance

=AH*SR-AH*AR

=(1175*6)-(1175*(6932.5/1175))

=117.5

Favourable

Direct balour efficiency variance

=SH*SR-AH*SR

=((390*3)*6)-(1175*6)

=-30

Unfavourable

Variable overhead spending variance

=Budgeted overheads for actual hours - Actual overheads

=(1175*4)-4650

=50

Favourable

Fixed overhead spending variance

=Budgeted fixed overhead - Actual fixed overhead

=(400*3*15)-18100

=-100

Unfavourable

Variable overhead efficiency variance

=Standard variable overhead for production-Budgeted overhead for actual hours

=(4*390*3)-(4*1175)

=-20

Unfavourable

Fixed overhead volume variance

=Absorbed fixed overhead - Budgeted fixed overheads

=(15*390*3)-(400*3*15)

=-450

Unfavourable