Inputs Standard Quantity or hours Standard Price or Rate Standard Cost Per Unit
ID: 2482176 • Letter: I
Question
Inputs
Standard Quantity or hours
Standard Price or Rate
Standard Cost Per Unit
Direct materials
6.9 liters
$ 5 .00 per liter
$ 34.50
Direct labor
0.3 hours
$ 17.00 per hour
$5.10
Variable overhead
0.3 hours
$ 6.00 per hour
$1.80
The company reported the following results concerning this product in August.
Originally Budgeted output
8,6000 units
Actual output
8,400 units
Raw materials used in production
58,330 liters
Actual direct labor-hours
2,310 hours
Purchases of raw materials
62,500 liters
Actual price of raw materials
$ 4.90 per liter
Actual direct labor rate
$ 17.10 per hour
Actual variable overhead rate
$ 5.50 per hour
The materials price variance is recognized when materials are purchased. Variable overhead is applied on the basis of direct labor-hours.
Compute the following:
A. Materials Quantity Varience
B. Materials Price Varience
C. Direct Labor Varience
D. Direct Labor rate Vareince
E. Variable over head controllable varience
Inputs
Standard Quantity or hours
Standard Price or Rate
Standard Cost Per Unit
Direct materials
6.9 liters
$ 5 .00 per liter
$ 34.50
Direct labor
0.3 hours
$ 17.00 per hour
$5.10
Variable overhead
0.3 hours
$ 6.00 per hour
$1.80
Explanation / Answer
A. Material Quantity Variance = (Actual Quantity - Standard Quantity) * Standard price
= (58330 - 57960) * $5 = 1850 (Unfavorable)
B. Material Price Variance = Actual Quantity * (Actual Price - Standard Price)
= 58330 * (4.90 - 5) = 5833 (Favorable)
C. Direct Labor Varience = Labour rate variance + labour efficiency variance(calculated in D)
labour efficiency variance = (Actual Hours - Standard Hours) * standard rate
= (2310 - .3*8400) * 17 = 3570 (favorable)
Direct Labor Varience = 3570 - 231 = 3339
D. Direct Labor rate Vareince = Actual Hours (Actual Rate - Standard Rate)
= 2310 * (17.10 - 17) = 231 Unfavorable
E. Variable over head controllable varience = Actual Overhead - Absorbed Overheads
= 2310*5.5 - 1.8*8400
= 12705 - 15120 = 2415 (Unfavorable)