Medex Pharmaceutical developed the following standard costs for its product in 2
ID: 2488932 • Letter: M
Question
Medex Pharmaceutical developed the following standard costs for its product in 2014: The company planned to work 2,725 direct labor hours and planned to produce 10,900 units of product in 2014 Actual results for 2014 are as follows: 11,000 units of product were produced. Actual direct materials purchased and used during the year amounted to 13.750 pounds at a cost of $28,875. Actual direct labor costs were $33,320 for 2,800 direct labor hours worked. Total actual manufacturing overhead incurred amounted to $35,740 Instructions Calculate the following variances showing all computations supporting your answers Indicate if the variances are favorable (F) or unfavorable (U). (a) Direct materials price and direct materials quantity variances. (b) Direct labor price and direct labor quantity variances (c) Total overhead varianceExplanation / Answer
Direct Material Price Variance= (Standard Price- Actual Price) x Actual Quantity
=standard Price x Actual Qty- Actual Price x Acutal Quantity
=2 x 13,750-$28,875
=27,500-28,875
=1,375 U
Standard Qty = Standard Qty for actual Production
=1.2 x 11,000
=13,200
Direct Material Quantity Variance =( Standard Qty- Actual Qty ) x Standard Price
= Standard Qty x Standard Price- Actual Qty x Standard Price
=13,200 x 2 -13,750 x 2
=26,400-27,500
=1,100 U
Labor Price Variance= (Standard Price- Actual Price) x Actual hrs
= Standard Price x Actual hrs- Actual Price x Actual hrs
=12 x 2,800-33,320
=33,600-33,320
=280 F
Standard hrs= Standard hrs for Actual Production
=0.25 x 11,000
=2,750 hrs
Labor Quantity Variance=( Standard hrs- Actual hrs) x Standard Price
=(2,750 – 2,800) x 12
=600 U
Total Overhead Variance= Standard Overhead Cost – Actual Overhead Cost
=Standard Price x Standard hrs – Actual over head cost
=(0.4 x 11,000 x 3) + (0.5 x 11,000 x 4) x -35,740
=13,200+22,000-35,740
=35,200-35,740
=540 U