The Clark Company makes a certain product and uses a standard cost system. Some
ID: 2582856 • Letter: T
Question
The Clark Company makes a certain product and uses a standard cost system. Some data concerning this product for the month of May are as follows: Labor rate variance $7,000 F Labor efficiency $12,000 F Variable overhead efficiency variance $4,000 F Number of units of finished products made 10,000 Standard labor rate $12/direct labor hour Standard variable overhead rate $ 4/direct labor hour Actual labor hours used 14,000 Actual variable overhead costs incurred $58,290 1. The actual overhead spending variance for May was ________ 2. The actual direct labor rate for May in dollars per hour was ______ 3. The total standard cost for direct labor for May was ______ 4. The total standard cost for variable overhead for May was _____. 5. The standard hours allowed to make one unit of product are _______.
Explanation / Answer
CLARK COMPANY: The given data can be stated as below: Labor rate variance: (Actual labor rate-Standard labor rate)*Actual labor hours = - $7000 Labor efficiency variance: (Actual labor hours-Standard labor hours)*Standard labor rate = -$12000 Variable overhead efficiency variance: (Actual labor hours-Standard labor hours)*Standard VOH rate = -$4000 Substituting other available values into the above equations, we have Labor rate variance: (Actual labor rate-12)*14000 = - $7000 Labor efficiency variance: (14000-Standard labor hours)*Standard labor rate= -$12000 Variable overhead efficiency variance: (14000-Standard labor hours)*4 = -$4000 ACTUAL DIRECT LABOR RATE FOR MAY IN DOLLARS PER HOUR: This can be found out from (Actual labor rate-12)*14000 = - $7000 14000*ALR-168000 = -7000 14000*ALR = 161000 2) Actual Direct labor rate = $11.50 STANDARD LABOR HOURS FOR ACTUAL PRODUCTION: This can be found out from Variable overhead efficiency variance: (14000-Standard labor hours)*4 = -$4000 56000-4*Standard labor hours = -4000 Standard labor hours for actual production = 52000/4 = 13000 hours 5) Standard hours allowed to make one unit = 13000/10000 = 1.3 hours/unit. 4) The total standard cost for variable overhead for May = 13000*4 = $52,000 3) The total standard cost for direct labor for May = 13000*12 = $156,000. 1) Variable overhead spending variance = 58290-52000 = $6290 [U]