Question

1) Direct materials variances:

Yealink Company produces a product that requires 5.0 standard pounds per unit. The standard price is $7.50 per pound. If 30,000 units used 72,000 pounds, which were purchased at $8.00 per pound, what is the direct materials (A) price variance, (B) quantity variance, and (C) cost variance?

2) Direct labor variances

Yealink Company produces a product that requires 2 standard direct labor hours per unit at a standard hourly rate of $10 per hour. If 7,500 units used 30,900 hours at an hourly rate of $9.90 per hour, what is the direct labor (A) rate variance, (B) time variance, and (C) cost variance?

3) Factory overhead controllable variance

Yealink Company produced 7,500 units of product that required 2 standard direct labor hours per unit. The standard variable overhead cost per unit is $0.45 per direct labor hour. The actual variable factory overhead was $26,385. Determine the variable factory overhead controllable variance.

4) Factory overhead volume variance:

Yealink Company produced 7,500 units of product that required 2 standard direct labor hours per unit. The standard fixed overhead cost per unit is $0.575 per direct labor hour at 29,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.

Answer 1

1.

Direct material price variance = (Standard price - Actual price) * Actual quantity

Direct material price variance = ($7.50 - $8) * 72,000 = $36,000 Unfavorable

Direct material quantity variance = (Standard quantity - Actual quantity) * Standard price

Standard quantity = 30,000*5 = 150,000 pounds

Direct material quantity variance = (150,000 - 72,000) * $7.50 = $585,000 Favorable

Direct material cost variance = $585,000 F + $36,000 U = $549,000 Favorable

2.

Direct labor rate variance = (Standard rate - Actual rate) * Actual hours

Direct labor rate variance = ($10 - $9.90) * 30,900 = $3,090 Favorable

Direct labor time variance = (Standard hours - Actual hours) * Standard rate

Standard hours = 7,500 * 2 = 15,000 hours

Direct labor time variance = (15,000 - 30,900) * $10 = $159,000 Unfavorable

3.

Variable factory overhead controllable variance = Actual overhead - Applied overhead

Variable factory overhead controllable variance = $26,385 - (7,500*2*$0.45)

Variable factory overhead controllable variance = $26,385 - $6,750 = $19,635 Unfavorable

4.

Fixed factory overhead volume variance = Budgeted fixed overhead - Applied fixed overhead

Fixed factory overhead volume variance = (29,000*$0.575) - (7,500*2*$0.575)

Fixed factory overhead volume variance = $16,675 - 8,625 = $8,050 Unfavorable