Question

In: Accounting

The standards for one case of liquid weed killer are as follows: Direct materials 6 lb...


The standards for one case of liquid weed killer are as follows:
Direct materials 6 lb @ $ 7.5 /lb
Direct labor 3.6 hr @ $ 16 /hr
Variable overhead (based on machine hours) 1.2 hr @ $ 5.5 /hr

During the week ended May 6, the following activity took place:
   4,332 machine hours were worked.

23,028 lb of raw material were purchased for inventory at a total cost of $176,164.

3,800 cases of finished product were produced.

22,683 lb of raw material were used.

13,379 labor hours were worked at an average rate of $16.25 per hour.

$23,003 actual variable overhead costs were incurred.

Required:

Calculate each of the following variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

a. Price variance for raw materials purchased.
b. Raw materials usage variance.
c. Direct labor rate variance.
d. Direct labor efficiency variance.
e. Variable overhead spending variance.
f. Variable overhead efficiency variance.

Solutions

Expert Solution

  • All working forms part of the answer
  • Workings

Actual DATA for

3800

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct Material

22683

$              7.650

$        173,524.75

Direct labor

13379

$              16.25

$        217,408.75

Variable Overhead

4332

$                5.31

$           23,003.00

Standard DATA for

3800

units

Quantity (SQ)

Rate (SR)

Standard Cost

[A]

[B]

[A x B]

Direct Material

( 6 lbs x 3800 units)=22800 lbs

$                   7.50

$     171,000.00

Direct labor

( 3.6 hours x 3800 units)=13680 hours

$                16.00

$     218,880.00

Variable Overhead

( 1.2 hours x 3800 units)=4560 hours

$                   5.50

$       25,080.00

  • All Variances, that’s been asked:

Material Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Quantity purchased

(

$                        7.50

-

$                       7.65

)

x

23028

-3454

Variance

$              3,454.00

Unfavourable-U

Material Quantity Variance

(

Standard Quantity

-

Actual Quantity

)

x

Standard Rate

(

22800

-

22683

)

x

$                           7.50

877.5

Variance

$                  877.50

Favourable-F

Labor Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$                     16.00

-

$                    16.25

)

x

13379

-3344.75

Variance

$              3,344.75

Unfavourable-U

Labour Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

13680

-

13379

)

x

$                        16.00

4816

Variance

$              4,816.00

Favourable-F

Variable Overhead Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$                        5.50

-

$                       5.31

)

x

4332

823

Variance

$                  823.00

Favourable-F

Variable Overhead Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

4560

-

4332

)

x

$                           5.50

1254

Variance

$              1,254.00

Favourable-F

  • Answers [Summarised]

Price variance for raw materials purchased.

$                                                     3,454.00

Unfavourable-U

Raw materials usage variance.

$                                                        877.50

Favourable-F

Direct labor rate variance.

$                                                     3,344.75

Unfavourable-U

Direct labor efficiency variance.

$                                                     4,816.00

Favourable-F

Variable overhead spending variance.

$                                                        823.00

Favourable-F

Variable overhead efficiency variance.

$                                                     1,254.00

Favourable-F


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