Question

The following data were drawn from the records of Benson Corporation.

Planned volume for year (static budget)		3,800	units
Standard direct materials cost per unit		2.70	pounds	@	$	1.50	per pound
Standard direct labor cost per unit		2.50	hours	@	$	3.80	per hour
Total expected fixed overhead costs	$	14,440
Actual volume for the year (flexible budget)		4,000	units
Actual direct materials cost per unit		2.40	pounds	@	$	2.10	per pound
Actual direct labor cost per unit		2.80	hours	@	$	3.30	per hour
Total actual fixed overhead costs	$	10,240

1. Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity.
2. Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).
3. Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours.
4. Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).
5. Calculate the predetermined overhead rate, assuming that Benson uses the number of units as the allocation base.
6. Calculate the fixed cost spending variance. Indicate whether the variance is favorable (F) or unfavorable (U).
7. Calculate the fixed cost volume variance. Indicate whether the variance is favorable (F) or unfavorable (U).

Answer 1

ANS :-

A) PREPARE A MATERIAL VARIANCE TABLE:

STANDARD PRICE PER POUND	1.50
ACTUAL PRICE PER POUND	2.10
STANDARD QUANTITY ON FLEXIBLE BUDGET(4000*2.80)	11200
ACTUAL QUANTITY(4000*2.40)	9600

B) CALCULATE MATERIAL VARIANCE :

MATERIAL PRICE VARIANCE = ( STANDARD PRICE - ACTUAL PRICE ) ACTUAL QUANTITY

= (1.50-2.10)9600

MATERIAL PRICE VARIANCE = 5760 UNFAVORABLE

MATERIAL USAGE VARIANCE = ( STANDARD QUANTITY - ACTUAL QUANTITY) STANDARD PRICE

= (11200-9600)1.50

MATERIAL USAGE VARIANCE = 2400 FAVORABLE

C) PREPARE LABOR VARIANCE TABLE :

STANDARD PRICE PER HOUR	3.80
ACTUAL PRICE PER HOUR	3.30
STANDARD HOUR FOR FLEXIBLE BUDGET(4000*2.5)	10000
ACTUAL HOUR (4000*2.80)	11200

D)

Labor price variance = (Standard rate-actual rate)actual hours

= (3.80-3.30)11200

Labor price variance = 5600 F

Labor usage variance = (Standard hour-actual hour)Standard rate

= (4000*2.5-11200)*3.8

Labor usage variance = 4560 U.

E)

predetermined overhead rate (14440/3800) = 3.80 per unit

Fixed cost spending variance

Actual -budgeted

10240 - 14440 = -4200

Fixed cost volume variance

(3.80*4000)-14440 = 760

F) FIXED COST SPENDING VARIANCE ;

ACTUAL FIXED OVERHEAD EXPENSES - BUDGETED FIXED OVERHEAD EXPENSES

= 10240-14440

= 4200 FAVORABLE