Question

Question 5 – Chapter 10

Working With Variances

From the following data, determine the total actual costs incurred for direct material, direct labor, and variable overhead.

		Standard Costs	Variances
Direct material		$155,000
Price variance			3,000	U
Quantity variance			4,000	F
Direct labor		135,000
Rate variance			1,400	U
Efficiency variance			1,800	U
Variable overhead		79,000
Spending variance			1,000	F
Efficiency variance			600	U

	Actual Costs
Direct material
Direct labor
Variable overhead

Answer 1

Calculation of material variances

Direct material quantity variance = Standard price x (Standard quantity - Actual quantity)

4,000 = (Standard price x Standard quantity) - (Standard price x Actual quantity)

4,000 = 155,000 - (Standard price x Actual quantity)

Standard price x Actual Quantity = $151,000 (equ i)

Direct material price variance = Actual quantity x (Standard price - Actual price)

- 3,000 = Actual quantity x (Standard price - Actual price)

- 3,000 = (Standard price x Actual Quantity) - (Actual price x Actual quantity)

- 3,000 = 151,000 - (Actual price x Actual quantity)

Actual cost = $154,000

Calculation of labor cost variances

Direct labor efficiency variance = Standard rate x (Standard time - Actual time)

-1,800 = (Standard rate x Standard time) - (Standard rate x Actual time)

-1,800 = 135,000 - (Standard rate x Actual time)

Standard rate x Actual time = 136,800

Direct labor rate variance = Actual time x (Standard rate - Actual rate)

-1,400 = (Standard rate x Actual time) - (Actual rate x Actual time)

-1,400 = 136,800 - (Actual rate x Actual time)

Actual rate x Actual time = 136,800 + 1,400

Actual cost = $138,200

Calculation of variable overhead variances

Variable overhead spending variance = Standard variable overheads - Actual variable overheads

1,000 = 79,000 - Actual variable overheads

Actual variable overheads = $78,000

	Actual cost
Direct material	$154,000
Direct labor	$138,200
Variable overhead	$78,000

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