Problem 11-15 Comprehensive Variance Analysis [L011-1, LO11-2, LO11-3] Helix Com
ID: 2467537 • Letter: P
Question
Problem 11-15 Comprehensive Variance Analysis [L011-1, LO11-2, LO11-3] Helix Company produces several products in its factory, including a karate robe. The company uses a standard cost system to assist in the control of costs. According to the standards that have been set for the robes, the factory should work 990 direct labor-hours each month and produce 1,980 robes. The standard costs associated with this level of production are as follows: Per Unit Totalof Product $39,798 20.10 3.00 Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) $ 5,940 3,168 1.60 $ 24.70 During April, the factory worked only 1,000 direct labor-hours and produced 2,200 robes. The following actual costs were recorded during the month: Direct materials (7,000 yards) Direct labor Variable manufacturing overhead Per Unit Totalof Product $40,700 $18.50 3.20 1.80 $ 7,040 $ 3,960 $23.50 At standard, each robe should require 3.00 yards of material. All of the materials purchased during the month were used in production.Explanation / Answer
1. Materials price and quantity variance for April:
2. Labor rate and efficiency variances:
Labor rate variance = ( $ 6 - $ 7.04) x 1,000 = $ 1,040 U
Labor efficiency variance = ( Standard hours for actual output - Actual hours worked) x Standard rate per hour = ( 1,100 - 1,000) x 6 = $ 600 F
3. Variable manufacturing overhead rate and efficiency variance:
Variable manufacturing overhead rate variance = ( Std. rate - Actual rate) x Actual labor hours = ( 3.20 - 3.96) x 1000 = $ 760 U
Variable manufacturing overhead efficiency variance = ( Standard hours - Actual hours) x Std. rate = ( 1,100 - 1,000) x $ 3.20 = $ 320 F
Materials price variance $ 46,900 - $ 40,700 $ 6,200 F Materials quantity variance 6,600 - 7,000 x $ 6.70 = $ 2,680 U