Question

Problem 11-1A (Video) Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below. Direct materials—1 pound plastic at $7.00 per pound $ 7.00 Direct labor—2.0 hours at $11.50 per hour 23.00 Variable manufacturing overhead 11.00 Fixed manufacturing overhead 13.00 Total standard cost per unit $54.00 The predetermined manufacturing overhead rate is $12.00 per direct labor hour ($24.00 ÷ 2.0). It was computed from a master manufacturing overhead budget based on normal production of 11,800 direct labor hours (5,900 units) for the month. The master budget showed total variable costs of $64,900 ($5.50 per hour) and total fixed overhead costs of $76,700 ($6.50 per hour). Actual costs for October in producing 4,100 units were as follows. Direct materials (4,200 pounds) $ 29,820 Direct labor (8,030 hours) 95,557 Variable overhead 68,878 Fixed overhead 31,522 Total manufacturing costs $225,777 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. Total materials variance $ Materials price variance $ Materials quantity variance $ Total labor variance $ Labor price variance $ Labor quantity variance $ (b) Compute the total overhead variance. Total overhead variance $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

(a) Total material variance = standard units × standard price - actual units × actual price

= 4100units / $1 pound plastic × $7 - $29820

= $28700 - $29820

= (-) 1120 (ADVERSE)

Material price variance = actual output ( standard price - actual price )

= 4200pound ( $7 - $29820/ 4200pounds)

= 4200pound ( $7 - $7.1 )

= (-) $420 ( ADVERSE )

Material quantity variance = Standard rate ( standard quantity - actual quantity )

= $7 ( 4100pounds - 4200pounds)

= $7 × (-) 100pounds

=(-) $700 (ADVERSE)

Total labour variance = Standars hours × standard price - Actual hours × actual price

= (2hours × 4100 units ) × $11.50 - $95557

= $94300 - $95557

= (-) $1257 (ADVERSE)

Labour price variance = Actual hours ( standard price - actual price )

= 8030 hours ($11.50 - $95557 / 8030 hours )

= 8030 hours ( $11.50 - $11.90)

= (-) $3212 (ADVERSE)

Labour quantity variance = Standard rate ( standard hours - actual hours )

= $11.5 ( 2hours × 4100units - 8030 hours)

= $11.5 ( 8200hours - 8030 hours)

= $1955 (FAVOURABLE)

(b) Total Overhead variance = Absorbed overheads - Actual overheads

= Actual output × standard rate - actual overheads

= 4100 units × ( $11 + $13 ) - ( $68878 + $31522 )

= 4100 units ×$24 - $100400

= $98400 - $100400

= 2000 (FAVOURABLE)