Corporation makes a product with the following standard costs: The company appli
ID: 2445535 • Letter: C
Question
Corporation makes a product with the following standard costs: The company applies variable overhead on the basis of direct - labor - hours. The direct materials purchases variance is computed when the raw materials are purchased. 1. Compute the materials quantity variance. 2. Compute the materials price variance. 3. Compute the labor efficiency variance. 4. Compute the direct labor rate variance. 5. Compute the variable overhead efficiency variance. 6. Compute the variable overhead rate variance. SHOW WORKExplanation / Answer
1)
Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price
Materials usage/quantity variance = (65550 - 7.8*8500)*1
Materials usage/quantity variance = $ 750 Favorable
2)
Materials price variance = (Actual price - Standard Price) *Actual Quantity
Materials price variance = (75900/69000 - 1)*69000
Materials price variance = $ 6900 Unfavorable
3)
Labor efficiency variance = (Actual Hour-Standard Hour )Standard Rate
Labor efficiency variance = (3410 - 8500*0.4)*18
Labor efficiency variance = 180 Unfavorable
4)
Labor rate variance = (Actual Rate-Standard Rate)*Actual Hour
Labor rate variance = (66495/3410 - 18)*3410
Labor rate variance = $ 5115 Unfavorable
5)
Variable Overhead efficiency variance =(Actual Hour-Standard Hour )Standard Rate
Variable Overhead efficiency variance = (3410 - 8500*0.4)*3
Variable Overhead efficiency variance = 30 Unfavorable
6)
Variable Overhead rate variance = (Actual Rate*Actual Hour -Standard Rate*Actual Hour )
Variable Overhead rate variance = (9889 - 3*8500*0.4 )
Variable Overhead rate variance = $ 311 favorable