Material, Labor, and Variable Overhead Variances The following summarized manufa

Question

Material, Labor, and Variable Overhead Variances The following summarized manufacturing data relate to Brown Corporation's May operations, during which 2,000 finished units of product were produced. Normal monthly capacity is 1,100 direct labor hours Standard Units Costs Total Actual Costs Direct material Standard (3 lb.@ $3.00/lb.) $9 Actual (6,400 lb. @ $3.30/lb.) $21,120 Direct labor Standard (0.5 hr. $15/hr.) $7.50 Actual (950 hrs. @ $14.80/hr.) 14,060 Variable overhead Standard (0.5 hr.@ $5/hr.) $2.50 Actual 5,300 $19 $40,480 Tota

Explanation / Answer

Material Cost Variances:-

Actual Cost = $ 21120

Split Cost = 3*2000*3

Standard Cost = $ 18000

Material Price Variance = (3 - 3.3)*6400 = $ 1920 (U)

Material Efficiency Variance = (6000-6400)*3 = $ 1200(U)

Labour Cost Variances:-

Actual Cost = $14060

Split Cost = 0.5*2000*15

Standard Cost = $15000

Labour Rate Variance = (15-14.80)*950 = $ 190 (F)

Labour Efficiency Variance = (1000 - 950)*15 = $ 750 (F)

Variable Overhead Variances:-

Actual Cost = $ 5300

Split Cost = 0.5*2000*5

Standard Cost = $ 5000

Variable overhead spending Variance = (5 - 5.3)*1000 = $ 300 (U)

Variable overhead Efficiency Variance = (1000 - 1000)*5 = NIL

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