Question

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—1 pound plastic at $7 per pound		$ 7
Direct labor—1.6 hours at $12 per hour		19.2
Variable manufacturing overhead		12
Fixed manufacturing overhead		4
Total standard cost per unit		$42.2

The predetermined manufacturing overhead rate is $10 per direct labor hour ($16 ÷ 1.6). It was computed from a master manufacturing overhead budget based on normal production of 8,000 direct labor hours (5,000 units) for the month. The master budget showed total variable costs of $60,000 ($7.5 per hour) and total fixed overhead costs of $20,000 ($2.5 per hour). Actual costs for October in producing 4,800 units were as follows.

Direct materials (5,100 pounds)		$ 36,720
Direct labor (7,400 hours)		92,500
Variable overhead		59,700
Fixed overhead		21,000
Total manufacturing costs		$209,920

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a)

Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

Total materials variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Materials price variance		$		Neither favorable nor unfavorableUnfavorableFavorable
Materials quantity variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Total labor variance		$		FavorableNeither favorable nor unfavorable unfavorable
Labor price variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Labor quantity variance		$		Neither favorable nor unfavorableFavorableUnfavorable

Answer 1

Total Material Variance = Actual Material cost-(Actual Quantity*Atandard cost) \(=36720-\left(4800^{*} 7\right)\)

\(=3120(\mathrm{U})\)

 

Material Price Variance = (Actual Quantity "Actual Price)-(Actual Quantity *Standard Price) \(=[36720-(5100 * 7)]\)

\(=1020(\mathrm{U})\)

 

Material Quantuty Variance = (Actual Quantity "Standard Price)- (Standard Quantity*Standard Price)

\(=\left(5100^{*} 7\right)-\left(4800^{*} 7\right)\)

\(=2100(\mathrm{U})\)

 

Total Labour Variance = Actual Labour cost-(Actual hours* Standard Rate) \(=92500-\left(4800^{*} 12^{*} 1.6\right)\)

\(=340(\mathrm{U})\)

 

Labour Rate Variance \(=\left(\right.\) actual Hours \(^{*}\) Standard rate \()\) -(Standard Hours*standard Rate)

\(=92500-\left(7400^{*} 12\right)\)

\(=3700\) (U) 

 

Labour Quantity Variance = (actual Hours*Standard rate)-(Standard Hours*Standard Rate) \(=\left(7400^{*} 12\right)-\left(4800^{*} 1.6^{*} 12\right)\)

\(=3360\) (F)