Question

Beakins Company produces a single product. The standard cost card for the product follows:

	Direct materials (4 yards @ $5 per yard).............................	$20
	Direct labor (1.5 hours @ $10 per hour)..............................	$15
	Variable manufacturing overhead (1.5 hrs. @ $4 per hour)	$6

During a recent period the company produced 1,200 units of product. Various costs associated with the production of these units are given below:

	Direct materials purchased (6,000 yards).....	$29,400
	Direct materials used in production................	5,120	yards
	Direct labor cost incurred (2,100 hours).........	$21,462
	Variable manufacturing overhead cost incurred.............................................................	$10,080

The company records all variances at the earliest possible point in time. Variable manufacturing overhead costs are applied to products on the basis of direct labor hours.

a)    Compute the materials price variance for the period and indicate whether it is Favorable or Unfavorable.

b)   Compute the materials quantity variance for the period and indicate whether it is Favorable or Unfavorable.

c)    Compute the labor rate variance for the period and indicate whether it is Favorable or Unfavorable.

d)   Compute the labor efficiency variance for the period and indicate whether it is Favorable or Unfavorable.

e)    Compute the variable overhead spending variance for the period and indicate whether it is Favorable or Unfavorable

f)     Compute the variable overhead efficiency variance for the period and indicate whether it is Favorable or Unfavorable

Answer 1