Question

In: Accounting

Fortes Inc. has provided the following data concerning one of the products in its standard cost...

Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate
Direct materials 7.9 ounces $ 8.00 per ounce
Direct labor 0.5 hours $ 25.70 per hour
Variable manufacturing overhead 0.5 hours $ 6.30 per hour

The company has reported the following actual results for the product for April:

Actual output 7,500 units
Raw materials purchased 63,010 ounces
Actual cost of raw materials purchased $ 379,910
Raw materials used in production 59,260 ounces
Actual direct labor-hours 3,440 hours
Actual direct labor cost $ 92,520
Actual variable overhead cost $ 21,034

Required:

a. Compute the materials price variance for April.

b. Compute the materials quantity variance for April.

c. Compute the labor rate variance for April.

d. Compute the labor efficiency variance for April.

e. Compute the variable overhead rate variance for April.

f. Compute the variable overhead efficiency variance for April.

Solutions

Expert Solution

a. Computation of Direct material Price Variance

Direct material Price Variance = (Standard Price-Actual Price)*Actual Quantity purchased

Standard price per 1 ounce A $8.00
Actual Price per 1 ounce B =$379910/63,010 $6.03
Actual ounce Purchased C        63,010
Direct material Price Variance (A-B)*C $124,170 i.e. Favorable

b. Computation of Direct material Quantity Variance

Direct material Quantity Variance = (Standard Quantity -Actual quantity used)*Standard Price

Standard Material of ounce for actual production A = 7500 units * 7.9 ounce        59,250
Actual Ounce used B        59,260
Standard Price per ounce C $8.00
Direct material Quantity Variance (A-B)*C -$80 i.e. Unfavorable

c. Computation of Labor Rate Variance

Direct Labor Price Variance = (Standard Rate-Actual Rate)*Actual hours worked

Standard Rate per hour A $25.70
Actual Rate per hour B = $92,520/3440 $26.90
Actual hours worked C 3440
Direct Labor Price Variance (A-B)*C -$4,112 i.e. Unfavorable

d. Computation of Labor Efficiency Variance

Direct labor Efficiency Variance = (Standard hours -Actual hours)*Standard Rate

Standard hours for actual production A = 7500 units* 0.5 hours          3,750
Actual hours worked B          3,440
Standard rate C $25.70
Direct labor Quantity Variance (A-B)*C $7,967 i.e. Favorable

e. Computation of Variable Overhead Rate Variance

Variable Overhead Rate Variance = (Standard Rate-Actual Rate)*Actual Hours worked

Standard Rate A $6.30
Actual Rate B = $21,034/3,440 $6.11
Actual Hours worked C 3440
Variable Overhead Rate Variance (A-B)*C $638 i.e. Favorable

f. Computation of Variable Overhead Efficiency Variance

Variable Overhead Efficiency Variance = (Standard hours -Actual hours)*Standard Rate

Standard hours for actual production A = 7500 units* 0.5 hours          3,750
Actual hours worked B          3,440
Standard rate C $6.30
Variable Overhead Efficiency Variance (A-B)*C $1,953 i.e.Favorable

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