Miami Gardens Manufacturing Corp. makes a specialty product and has developed th
ID: 2469545 • Letter: M
Question
Miami Gardens Manufacturing Corp. makes a specialty product and has developed the following standard costing information:
Direct materials 2 lbs $8.50 per lb.
Direct labor 1.5 hrs $11.00 per hour
Variable support rate $28.50 per direct labor hour
Actual production for September used the following resources:
Units manufactured 3,000
Direct materials used in production 6,125 lbs $ 51,756.25
Direct labor 4,435 hrs $ 49,893.75
Actual variable support $128,526.30
Calculate the following variances:
Direct material price variance
Direct material quantity variance
Total direct material variance
Direct labor rate variance
Direct labor efficiency variance
Total direct labor variance
Variable support rate variance
Variable support efficiency variance
Total variable support variance
Explanation / Answer
1. Direct material price variance= Actual Quantity x Actual Price - Actual Quantity x Standard Price
=Actual Cost - Standard Cost of Actual Quantity = 51756.25 - 52062.5 = (306.25) = Adverse
= 6125 * 8.5 = 52062.5= Standard Cost
= 51,756.25= Actual Cost
Direct material quantity variance = ( SQ AQ ) × SP =( 6125-6000) * 8.5= 125* 8.5 = 1062.5 (Favourable)
Where,
SQ is the standard quantity allowed
AQ is the actual quantity of direct material used
SP is the standard price per unit of direct material
Total direct material variance = Direct material price variance + Direct material quantity variance = (306.25 )+ 1062.5= 756.25
Direct labor rate variance= Actual Cost - Standard Cost of Actual Hours
= Actual Quantity x Actual Rate - Actual Quantity x Standard Rate = 49893.75- 48785 = 1108.75
Actual Cost = $ 49,893.75
Standard Cost = 4,435 hrs * $11.00 per hour= 48785
Direct labor efficiency variance =Standard Cost of Actual Hours - Standard Cost
= Actual Hours x Standard Rate - Standard Hours x Standard Rate
= 4,435 hrs * 11 - 1.5*3000*11 = 48785 -49500 = (715)
Total direct labor variance = (SR x SH) – (AR x AH)= 11*4500 - $ 49,893.75 = (393.75)
Variable support rate variance = Actual hours worked x (Actual overhead rate - standard overhead rate)
= $128,526.30 - 4,435 hrs* $28.50= 128526.30 - 126397.5 = 2128.8
Variable support efficiency variance= ( SH AH ) × SR = (4500- 4435) * 28.5 = 1852.5
Where,
SH are standard direct labor hours allowed = 1.5 * 3000= 4500
AH are the actual direct labor hours= 4,435 hrs
SR is the standard variable overhead rate = $28.50 per direct labor hour
Total variable support variance= (SR x SH) – (AR x AH)= 28.5* 4500 - $128,526.30 = 128250 - 128526.30= (276.3)
Actual Units Produced * standard Quantity of Direct Material per unit = 3000 * 2 = 6000= SQ AQ= 6125Total direct material variance = Direct material price variance + Direct material quantity variance = (306.25 )+ 1062.5= 756.25
Direct labor rate variance= Actual Cost - Standard Cost of Actual Hours
= Actual Quantity x Actual Rate - Actual Quantity x Standard Rate = 49893.75- 48785 = 1108.75
Actual Cost = $ 49,893.75
Standard Cost = 4,435 hrs * $11.00 per hour= 48785