The Cengage Company makes Elmo toys. It has developed the following per unit sta
ID: 2600151 • Letter: T
Question
The Cengage Company makes Elmo toys. It has developed the following per unit standard costs for 2017 for each item:
Direct Direct Manufacturing
Materials Labor Overhead
Standard Quantity 4 pounds 3 hours 3 hours
Standard Price $3.00/lb $8.00/hr $4.00/DLH
Unit Standard Cost $12.00 $24.00 $12.00
In 2017, the company expected to produce 20,000 units of toys and
planned a level of 60,000 hours of direct labor.
Actual results for 2017 are presented below:
1. Direct materials purchased and used were 84,000 pounds at a cost of
$231,000.
2. Direct labor costs were $512,400 for 61,000 direct labor hours
actually worked.
3. Actual manufacturing overhead was $238,000.
4. Actual production was 20,500 units.
INSTRUCTIONS
Compute the following variances:
1. Direct materials: total, price and quantity.
2. Direct labor: total, price and quantity
3. Total overhead variance.
Place answer Show calculations here here (1) Total materials variance: Materials price variance: Materials quantity variance: (2) Total labor variance: Labor price variance: Labor quantity variance: (3) total overhead varianceExplanation / Answer
Cengage Company Production 20500 Units Expected Production 20000 Units Direct Material Direct Labor Manufacturing Overhead Standard Quantity 4 Pounds 3 Hours 3 Hours Standard Price $3 lb $8 hours $4 hours Unit Standard cost $12 $24 $12 Direct Material Purchase Price 84000 Pounds $231,000 Direct Labour 61000 DLH 512400 Actual Manufacturing Overhead 238000 Actual Material Price Per Pound=($231000/84000) $ 2.75 Actual Labor cost per hours=($512400/61000) 8.4 Actual Manufacturing Overhead Per hours=($238000/61000) 3.90 1) Direct material price variance Actual Material used( Standard Price-Actual Price) Direct material price variance=84000*($3-$2.75)= $ 21,000.00 (F) Direct material Quantity variance=((4*20500)-84000))*$3 (Standard Quantity-Actual Quantity)standard Price $ (6,000.00) (U) Total material cost Variance=($21000-$6000) Direct material Price variance+ Direct material Quantity variance $ 15,000.00 (F) 2) Direct labour rate variance=61000*($8-$8.4) Actual hours(Standard rate-Actual Rate) $ (24,400.00) (U) Direct Labour efficiency variance=((3*20500)-61000)*$8 (Standard Hours-Actual Hours)*Standard Rate $ 4,000.00 (F) Total direct labour cost variance=(-$24400+$4000) Direct labour rate variance+ Direct labour efficiency variance $ (20,400.00) (U) 3) Total Overhead Variance= Actual Overhead-Overhead applied Applied Overhead=(Standard Hours*Standard rate) Standard Hours=Budgeted Production*hours required per units of prod Standard Hours=20000*3=60000 Applied Overhead=(60000*$4)= 240000 Total Overhead Variance=($238000-$240000)= $ (2,000.00) (U)