Question

Requirement: 1

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		5.7	ounces	$	2.00	per ounce	$	11.40
Direct labor		0.2	hours	$	11.00	per hour	$	2.20
Variable overhead		0.2	hours	$	6.00	per hour	$	1.20

The company reported the following results concerning this product in June.

Originally budgeted output		3,900	units
Actual output		3,500	units
Raw materials used in production		20,700	ounces
Purchases of raw materials		21,800	ounces
Actual direct labor-hours		530	hours
Actual cost of raw materials purchases	$	42,600
Actual direct labor cost	$	13,900
Actual variable overhead cost	$	3,950

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead efficiency variance for June is:

Requirement: 2

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.6	ounces	$	3.00	per ounce	$	19.80
Direct labor		0.3	hours	$	10.00	per hour	$	3.00
Variable overhead		0.3	hours	$	5.00	per hour	$	1.50

The company reported the following results concerning this product in June.

Originally budgeted output		2,000	units
Actual output		2,500	units
Raw materials used in production		19,000	ounces
Purchases of raw materials		15,000	ounces
Actual direct labor-hours		510	hours
Actual cost of raw materials purchases	$	40,000
Actual direct labor cost	$	12,000
Actual variable overhead cost	$	3,000

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for June is:

Answer 1

• Requirement 1

Variable Overhead Efficiency Variance
(	Standard Hours = 3500 units x 0.2 Std hrs	-	Actual Hours	)	x	Standard Rate
(	700	-	530	)	x	$                           6.00
	1020
	Variance		$              1,020.00			Favourable-F

• Requirement 2

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate = $ 3000 / 510 hrs	)	x	Actual Labor Hours
(	$                               5.00	-	$                       5.88235294117	)	x	510
	-450
	Variance		$                  450.00			Unfavourable-U