Moates Corporation makes a product with the following standard costs: Direct mat
ID: 2470147 • Letter: M
Question
Moates Corporation makes a product with the following standard costs: Direct materials.....Standard quantity or hrs 6.5 kilos Standard price or rate $1.00 per kilo Direct labor.....standard 0.2 hrs standard $21.00 per hr Variable Overhead.....Standard 0.2 hrs standard $7.00 per hour. In january the company produced 5,800 units using 38,740 kilos of the direct material and 1,110 direct labor-hours. During the month, the company purchased 41,000 kilos of the direct material at a total cost of $49,200. The actual direct labor cost for the month was $20,979 and the acttual variable obverhead cost was $6,993. The company applies variable overhead on the basis of direct labor-hours. The direct labor materials purchases variance is computed when the materials are purchased. REQUIRED: a. compute the materials quantity variance b. compute the materials price variance c. compute the labor efficiency variance d. compute the variable overhead efficiency variance
Explanation / Answer
a. Material Quantity Variance = (Actual usage in units - Standard usage in units) x Standard cost per unit
= (38740 - 5800*6.5) * $1 = 1040
b. Materials price variance = (Actual Price - Standard Price) * Actual Quantity
= (49200/41000 - 1) * 41000 = 8200
c. Labor efficiency variance = (Actual hours - Standard hours) x Standard rate
= (1110 - 5800*.2) * $21 = 1050
d. Variable overhead efficiency variance = Standard overhead rate x (Actual hours - standard hours)
= $7 * (1110 - .2*5800) = 350