Medex Pharmaceutical developed the following standard costs for its product in 2
ID: 2489425 • 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. Calculate the following variances showing all computations supporting your answers Indicate if the variances are favorable (F) or unfavorable (U). Direct materials price and direct materials quantity variances Direct labor price and direct labor quantity variances Total overhead variance.Explanation / Answer
(a).
Direct Material Price variance = Actual Quantity at Actual price - Actual Quantity at Standard price
= 28875 - 13750*2 = 28875 - 27500 =$1375 U
Direct Material Quantity variance = Standard rate (Actual Quantity for actual production - Standard Quantity for actual production )
= 2(13750 - 1.2*11000) =2(13750 - 13200)=$1100 U
(b).
Direct labor Price variance = Actual Labor cost for production - Standard labor cost for actual production
= 33320 - 2800*12 = 33320 - 33600 = $280 F
Direct labor Quantity variance = Standard rate(Actual labour hour worked - Standard labor hour required)
=12(2800 - 11000*0.25)= 12(2800 - 2750)= $600 U
(c).
Total Overhead Variance = (Variable overhead absorbed + Fixed overhead absorbed) - Actual overhead
= (11000*1.2 +11000*2) - 35740 =35200 - 35740 = $540 U