Question

Bullseye Company manufactures dartboards. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (cork board)	2.00	sq. ft.	$	2.20	per sq. ft.	$	4.40
Direct labor	1	hrs.	$	15.00	per hr.		15.00
Variable manufacturing overhead (based on direct labor hours)	1	hrs.	$	0.30	per hr.		0.30
Fixed manufacturing overhead ($39,000 ÷ 260,000 units)							0.15

Bullseye has the following actual results for the month of September:

Number of units produced and sold		240,000
Number of square feet of corkboard used		490,000
Cost of corkboard used	$	1,029,000
Number of labor hours worked		248,000
Direct labor cost	$	3,496,800
Variable overhead cost	$	70,000
Fixed overhead cost	$	63,000

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Bullseye.
2. Calculate the direct labor rate, efficiency, and total spending variances for Bullseye.
3. Calculate the variable overhead rate, efficiency, and total spending variances for Bullseye.

Answer 1

Direct Material Price Variance = (Standard Price – Actual Price)*Actual Quantity purchased

= (2.20– Actual price)*490,000

= 2.20*490,000 – 1,029,000

= $49,000 Favorable

Direct material efficiency variance = (Standard Quantity – Actual Quantity Used)*Standard Price

= (2*240,000 – 490,000)*2.20

= $22,000 Unfavorable

Total Spending Variance = 49000 – 22000 = $27,000 Favorable

Direct Labor Price Variance = (Standard Price – Actual Price)*Actual Hours

= (15-Actual Rate)*248000

= 15*248000 – 3,496,800

= $223,200 Favorable

Direct Labor Efficiency variance = (Standard Hours – Actual Hours)*Standard Rate

= (1*240,000 -248000)*15

= $120,000 UnFavorable

Total Spending Variance = 223200 – 120,000 = $103,200 Favorable

Variable Overhead rate Variance = (Standard Price – Actual Price)*Actual Hours

= (0.30 – Actual rate)*248000

= 0.30*248000 – 70,000

= $4400 Favorable

Variable overhead Efficiency variance = (Standard Hours – Actual Hours)*Standard Rate

= (-8000)*0.30

= $2,400 Unfavorable

Total Spending Variance = 4400 –2400 = $2000 Favorable