Cost Element Standard (per unit) Actual Rudd Clothiers is a small company that m

Question

Cost Element

Standard (per unit)

Actual

Rudd Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2017, 10,500 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 15,500 direct labor hours. All materials purchased were used.

Cost Element

Standard (per unit)

Actual

Direct materials 7 yards at $4.20 per yard $300,915 for 74,300 yards ($4.05 per yard) Direct labor 1.10 hours at $13.00 per hour $164,255 for 12,350 hours ($13.30 per hour) Overhead 1.10 hours at $6.50 per hour (fixed $3.60; variable $2.90) $48,500 fixed overhead $37,500 variable overhead
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $55,800, and budgeted variable overhead was $44,950.

(a)

Compute the total, price, and quantity variances for (1) materials and (2) labor. (Round answers to 0 decimal places, e.g. 125.)
(1) Total materials variance $

FavorableUnfavorableNeither favorable nor unfavorable

Materials price variance $

UnfavorableFavorableNeither favorable nor unfavorable

Materials quantity variance $

Neither favorable nor unfavorableFavorableUnfavorable

(2) Total labor variance $

Neither favorable nor unfavorableUnfavorableFavorable

Labor price variance $

UnfavorableFavorableNeither favorable nor unfavorable

Labor quantity variance $

Neither favorable nor unfavorableFavorableUnfavorable

(b)

Compute the total overhead variance.
Total overhead variance $

Explanation / Answer

1. Total materials variance = Standard cost - Actual cost
= (10,500 x 7 x $4.20) - $300,915
= $7,785 Favorable

Materials price variance = (Standard Price - Actula price) x Actual quantity
= ($4.20 - $4.05) x 74,300 = $11,145 Favorable

Materials quantity variance = (Standard Quantity - Actual Quantity) x Standard Price
= {(10,500x7) - 74,300) x $4.20 = $3,360 Unfavorable

2. Total labor variance = Standard cost - Actual cost
= (10,500 x 1.10 x $13.00) - $164,255
  = $14,105 Unfavorable

Labor price variance = (Standard Price - Actula price) x Actual quantity
= ($13.00 - $13.30) x 12,350 = $3,705 Unfavorable

Labor quantity variance = (Standard Quantity - Actual Quantity) x Standard Price
= {(10,500x1.1) - 12,350) x $13.00 = $10,400 Unfavorable

(b) Computation of the total overhead variance = Standard - Actual
= {(10,500x1.10x2.9)+$55,800} - {$37,500+$48,500}
= $3,295 Favorable

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