Question

Jones Company has the following standards for its single product:

                     standard quantity            standard price
direct materials     13 pounds per unit           $5.10 per pound
direct labor          6 hours per unit            $16.00 per hour
variable overhead     6 hours per unit            $11.00 per hour

Jones Company reported the following information for the month of October:

1.  4,280 units were produced.
2.  63,000 pounds of direct materials were purchased at cost of $5.40 per
    pound.
3.  27,200 direct labor hours were worked.
4.  The actual variable overhead cost amounted to $303,800.
5.  The actual direct labor cost amounted to $414,800.
6.  There were no inventories of any type at October 1, however, the direct
    materials inventory at October 31 totaled 6,000 pounds.

A)Calculate the direct labor rate variance for October. If the variance is
favorable, place a minus sign in front of your answer (i.e., -5000). If
the variance is unfavorable, enter your answer as a number (i.e., 5000).

B) Calculate the direct material price variance for October. If the variance is favorable, place a minus sign in front of your answer (i.e., -5000). If the variance is unfavorable, simply enter your answer as a number (i.e., 5000).

C) Calculate the direct material quantity variance for October. If the variance is favorable, place a minus sign in front of your answer (i.e., -5000). If the variance is unfavorable, enter your answer as a number (i.e., 5000).

D) Calculate the variable overhead efficiency variance for October. If the variance is favorable, place a minus sign in front of your answer (i.e., -5000). If the variance is unfavorable, simply enter your answer as a number (i.e., 5000).

Answer 1

From the above

A)

Labour Rate Variance

(Std Rate - Actual Rate )* Actual Hours Worked

Std rate = 16

Actaul Rate = (414800/4280)/6 =16.153 ( as we took std rate per hour we should take actual rate per hour as well )

Actual Hours Worked = 27200

hence Labour Rate variance = (16-16.153)*27200 = 4161.6 ( unfavourable)

B)

Material Price Variance

(Std Rate-Actual Rate ) Actual Quantity

Std Price = 5.1

Actual Price = 5.4

Actua Qty = (63000-6000) = 57000 ( 63000 is purchase but 6000 is still in stock hence only 57000 is used for production

Variance = (5.1-5.4)*57000 = 17100 ( Unfavourable)

c)

Material Quantity Varinace

(Std Qty- Act Qty) * Std Price

Std Qty = 13 pound *4280 = 55640

Actual Qty = 57000 ( from B Calculation)

Std Price =5.1

Variance =( 55640-57000)*5.1 = 6936 ( unfavourable)

D)

Variable OH Efficiency Variance

(Actual Lab Hr - Budgeted Lab Hr) Std rate of Variable OH

Actual Lab hr= 27200

Std or Budgeted Lab Hr = 4280 units * 6 Hrs = 25680

Std Rate = 11

(27200-25680)*11= 16720( unfavourable)