Question

The following information is provided to assist you in evaluating the performance of the production operations of Studio Company: Units produced (actual) 57,000 Master production budget Direct materials $127,380 Direct labor 108,080 Overhead 167,910 Standard costs per unit Direct materials $1.65 × 2 gallons per unit of output Direct labor $14 per hour × 0.2 hour per unit Variable overhead $12.50 per direct labor-hour Actual costs Direct materials purchased and used $150,960 (81,600 gallons) Direct labor 134,231 (9,980 hours) Overhead 177,200 (61% is variable) Variable overhead is applied on the basis of direct labor-hours. Required: Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

Actual output	57000
Material Variance
	Standard	Budgeted based on actual results	Actual
Price	1.65	1.65	1.85
Quanity	2.00	114,000	81,600
Cost per unit	3.30	188,100	150,960
Total Material Cost varaince		37,140	Favorable
Material Price variance	= (Standard price - Actual Price) * Actual usage
	'(1.65-1.85)*81600
	(16,320)	Unfavorable
Material quanitity variance	= (Standard Quantity - Actual Quantity) * Budgered Price
	'(114000-81600)*1.65
	53,460	Favorable
Check	-
Actual output	57000
Labor variance
	Standard	Budgeted based on actual results	Actual
Price	14.00	14.00	13.45
Hours	0.20	11,400	9,980
Cost per unit	2.80	159,600	134,231
Total labor Cost varaince		25,369	Favorable
Labor Price variance	= (Standard price - Actual Price) * Actual usage
	'(14-13.45)*9980
	5,489	Favorable
Labor efficiency variance	= (Standard Quantity - Actual Quantity) * Budgered Price
	'(11400-9980)*14
	19,880	Favorable
Check	-
Variable overhead Variance
Actual hours	9,980
	Recovery rate	Budgeted Cost	Actuals
Variable Overhead	12.50	124,750	108,092
		124,750	108,092
Budgered Overheads	124,750
Actual overheads	108,092
Overhead cost Variance	16,658	Favorable