Question

	Total		Per Set of Covers
Direct materials	$	42,560	$	22.40
Direct labor	$	51,300		27.00
Variable manufacturing overhead (based on direct labor-hours)	$	6,840		3.60
			$	53.00

During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (12,000 yards)	$	45,600	$	22.80
Direct labor	$	49,000		24.50
Variable manufacturing overhead	$	7,000		3.50
			$	50.80

At standard, each set of covers should require 5.6 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

Answer 1

Answer:

1)material price variance =ACtual cost -[AQ*SR]

     = 45600 - [12000*4]

   = 45600 -48000

   = -2400 F    [input as 2400]

**Standard price per yard = 22.40/5.6=4

Material quantity variance =SR[AQ-SQ]

       = 4[12000-(2000*5.6)]

      = 4[12000- 11200]

        = 3200 U

2)Standard labour hours per unit = 2850/1900= 1.5 hours per unit

Standard rate per hour = 27/1.5= $ 18 per hour

labor rate variance =Actual cost -[AH*SR]

           = 49000 - [2800*18]

         = 49000 - 50400

         = - 1400 F    [Input as 1400]

Labor efficiency variance =SR[AH-SH]

              = 18[2800-(2000*1.5)]

            = 18[2800-3000]

            = -3600 F   [input as 3600]

3)Standard variable overhead rate =3.60/1.5 =$2.4 per hour

)Variable overhead rate variance =Actual cost -[AH*SR]

          = 7000-[2800*2.4]

         = 7000 - 6720

           = 280 U

Variable overhead efficiency variance =SR[AH-SH]

               = 2.4[2800-(2000*1.5)]

             = 2.4 [2800-3000]

             = -480 F   [INput as 480]