Question

Fine Oak Furniture manufactures high-quality wooden desks and uses a standard cost system. A standard cost card for one model of desk, the “heritage”, developed for 2019, is shown below:

Standard Cost per Unit:
Model: Heritage
	Standard		Standard			Standard
	Quantity		Price/Rate			Cost
Direct Materials	75	BF x	$ 0.45	per BF	=	$33.75
Direct Labour	1.25	Hrs x	$18.00	per Hr	=	$22.50
Variable Manufacturing Overhead	1.25	Hrs x	$4.00	per Hr	=	$5.00
Fixed Manufacturing Overhead	1.25	Hrs x	$6.00	per Hr	=	$7.50
Total Costs						$68.75
Note: BF stands for "board foot"

The company expected to produce and sell 300 units of the Heritage in March 2019.

Actual results for March 2019 are as follows:

• 310 units of the Heritage were produced.
• A total of 21,600 BF of wood was purchased and used at a cost of $9,993.
• Actual direct labour costs were $6,938 for 408 direct labour hours worked.
• Actual variable overhead incurred was $1,738 and actual fixed overhead incurred was $2,191.

Required:

Calculate the following variances and provide only numeric values without any formatting to the boxes given below. Be sure to indicate whether the variances are favourable or unfavourable as instructed. Round to the 4th decimal places for interim numbers, and round to the 2nd decimal places for final results.

	Variance Value	Favorable/Unfavorable		Explanation
	(absolute value)	(enter "1" for favorable, enter "0" for unfavorable)
Example: DM Price Variance	100	0		100U
a) Material price variance:	Blank 1. Calculate the answer by read surrounding text.	Blank 2. Calculate the answer by read surrounding text.
b) Material quantity variance:	Blank 3. Calculate the answer by read surrounding text.	Blank 4. Calculate the answer by read surrounding text.
c) Direct labour rate variance:	Blank 5. Calculate the answer by read surrounding text.	Blank 6. Calculate the answer by read surrounding text.
d) Direct labour efficiency variance:	Blank 7. Calculate the answer by read surrounding text.	Blank 8. Calculate the answer by read surrounding text.
e) Variable overhead spending variance:	Blank 9. Calculate the answer by read surrounding text.	Blank 10. Calculate the answer by read surrounding text.
f) Variable overhead efficiency variance:	Blank 11. Calculate the answer by read surrounding text.	Blank 12. Calculate the answer by read surrounding text.
g) Fixed overhead budget variance:	Blank 13. Calculate the answer by read surrounding text.	Blank 14. Calculate the answer by read surrounding text.
h) Fixed overhead volume variance:	Blank 15. Calculate the answer by read surrounding text.	Blank 16. Calculate the answer by read surrounding text.

      

Answer 1

Answer:

a)	Direct Material Price Variance
	Actual quantity	× (	Standard price	-	Actual price	) =	DM Price variance
	21,600	× (	0.45	-	($9,993/21,600)	) =	216	U
b)	Direct Material Quantity Variance
	Standard price	× (	Standard quantity	-	Actual quantity	) =	DM quantity variance
	0.45	× (	(310 × 75)	-	21,600	) =	742.5	F
c)	Direct Labor Rate Variance
	Actual hours	× (	Standard rate	-	Actual rate	) =	DL Rate variance
	408	× (	18.00	-	($6,938/408)	) =	408	F
d)	Direct Labor efficiency Variance
	Standard rate	× (	Standard hours	-	Actual hours	) =	DL efficiency variance
	18.00	× (	(310 × 1.25)	-	408	) =	369	U
e)	VOH spending Variance
	Actual hours	× (	Standard rate	-	Actual rate	) =	VOH spending variance
	408	× (	4.00	-	($1,738/408	) =	106	U
f)	VOH efficiency Variance
	Standard rate	× (	Standard hours	-	Actual hours	) =	VOH efficiency variance
	4.00	× (	(310 × 1.25)	-	408	) =	82	U
g)	FOH Budget variance
	Actual FOH	-	Budgeted FOH	=	FOH budget variance
	$2,191	-	(300 × $7.50)	=	59	F
h)	FOH volume variance
	Absorbed FOH	-	Budgeted FOH	=	FOH budget variance
	(310 × $7.50)	-	(300 × $7.50)	=	75	U