Cost Accounting Problem: Balderson Co. has a budgeted monthly capacity of 20,000
ID: 2482289 • Letter: C
Question
Cost Accounting Problem:
Balderson Co. has a budgeted monthly capacity of 20,000 direct labor hours with a standard production of 10,000 units at that capacity.
Standard cost cards reflect the following:
Materials..............................3 pounds @ $1.10 per pound.
Labor...................................$14.50 per hour
Overhead at normal capacity....................Fixed=$20,000, Variable=$ 5.00 per labor hour.
During the month, 30,000 pounds of material were purchased at a cost of $1.00 per pound. 9500 units were produced using 29,200 pounds of material. Labor hours required to complete the job were 19,500 at a total cost of $292,500. Actual factory overhead for the month was $113,000.
Required: Determine the following variances. Show all work for partial credit.
1. Material purchase price variance
2. Material price usage variance
3. Material quantity variance
4. Labor rate variance
5. Labor efficiency variance
6. Factory overhead using the 3-variance method.
Explanation / Answer
1 Material Purchase Price variance (Standard Price-Actual Price)*Actula Quantity used (1.10-1)*29200 = 2920 F 2 Material Price usage variance (Standard Cost-Actual Cost) (9500*3*1.1-29200*1) 2150 F 3 Material Quantity variance (Standard Quantity for Actual Output-Actual Quantity)*Standard Price (9500*3-29200)*1.10 = 770 U 4 Labor rate Varaince (Standard Price-Actual Price)*Actula Hours (14.5-292500/19500)*19500 9750 U 5 Labor Efficiency Variance (Standard Hour for Actual Output-Actual Hour worked)*Standard Price (20000/10000*9500-19500)*14.5 7250 U