Question

The following is information related to X Company, a company that uses a standard cost system:

Standard cost card for 1 unit of Product A:

Direct materials – Raw Material A   (1 kilogram @ $ 20/kg.)           $ 20

Direct materials – Raw Material B   (1 kilogram @$ 10/kg.)         $ 10

Direct labour       (1 hour @ $15/hr.)                                 $ 15

Variable overhead       (1 hour @ $ 5/hr.)                                  $   5

Fixed overhead    (1 hour @ $ 10/hr.)                                       $ 10

Total budgeted fixed overhead:                                            $ 1,000

Budget total units of production:                                         100 units

Actual units produced                                                       88 units

Actual costs incurred:                                                    Total    

Direct materials – Raw Material A   (130 kilograms                             $ 2,860

Direct materials – Raw Material B   ( 60 kilograms)                 $    660

Direct labour       (100 hours)                                         $ 1,600

Variable overhead       (100 hours)                                                 $    480

Fixed overhead                                                                       $ 1,120

Required:

Calculate the direct labour variances.

Calculate the two variable overhead variances.

Calculate the direct material variances.

Pls write clearly

Answer 1

• All working forms part of the answer
• Requirement 1: Direct Labor Variances

--Working

Actual DATA for		88	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	100	$              16.00	$             1,600.00

Standard DATA for		88	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 1 hours x 88 units)=88 hours	$                15.00	$         1,320.00

---Answer

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     15.00	-	$                    16.00	)	x	100
	-100
	Variance		$                  100.00			Unfavourable-U

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	88	-	100	)	x	$                        15.00
	-180
	Variance		$                  180.00			Unfavourable-U

Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$               1,320.00	-	$              1,600.00	)
	-280
	Variance		$                  280.00			Unfavourable-U

• Requirement 2: Variable Overhead Variances

---Working

Actual DATA for		88	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Variable Overhead	100	$                4.80	$                 480.00

Standard DATA for		88	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Variable Overhead	( 1 hours x 88 units)=88 hours	$                   5.00	$             440.00

---Answer

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        5.00	-	$                       4.80	)	x	100
	20
	Variance		$                    20.00			Favourable-F

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	88	-	100	)	x	$                           5.00
	-60
	Variance		$                    60.00			Unfavourable-U

• Requirement 3: Direct material Variances

Part 1: Variances for raw Material A

Actual DATA for		88	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	130	$            22.000	$             2,860.00

Standard DATA for		88	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1 kg x 88 units)=88 kg	$                20.00	$         1,760.00

Answer [3 Variances]

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     20.00	-	$                    22.00	)	x	130
	-260
	Variance		$                  260.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	88	-	130	)	x	$                        20.00
	-840
	Variance		$                  840.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$               1,760.00	-	$              2,860.00	)
	-1100
	Variance		$              1,100.00			Unfavourable-U

Part 2: Variances for Raw Material B

Actual DATA for		88	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	60	$            11.000	$                 660.00

Standard DATA for		88	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1 kg x 88 units)=88 kg	$                10.00	$             880.00

Answers: [3 Variances]

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     10.00	-	$                    11.00	)	x	60
	-60
	Variance		$                    60.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	88	-	60	)	x	$                        10.00
	280
	Variance		$                  280.00			Favourable-F
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                   880.00	-	$                  660.00	)
	220
	Variance		$                  220.00			Favourable-F