Question

ch 16 (4) The following information is provided to assist you in evaluating the performance of the production operations of Studio Company:

Units produced (actual)	53,000
Master production budget
Direct materials	$128,700
Direct labor	109,200
Overhead	173,550
Standard costs per unit
Direct materials	$1.65 × 2 gallons per unit of output
Direct labor	$14 per hour × 0.2 hour per unit
Variable overhead	$13.00 per direct labor-hour
Actual costs
Direct materials purchased and used	$127,360 (79,600 gallons)
Direct labor	132,683 (9,580 hours)
Overhead	173,200 (61% is variable)

Variable overhead is applied on the basis of direct labor-hours.

Required:

Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

Solution:

Material Price Variance -	TAKE THE PURCHASED UNITS
Material Cost/Price Variance	Actual Quantity(Standard Cost-Actual Cost)
Actual Quantity	79600
Standard Cost	1.65
Actual Cost	1.60
Material Cost/Price Variance	3980	Favorable

Material Quantity/ Efficiency Variance	Standard Cost ( Standard Quantity - Actual Quantity)
Standard Cost	1.65
Standard Quantity	106000
Actual Quantity	79600
Material Quantity/ Efficiency Variance	43560	Favorable

Direct Labor Rate Variance	Actual Labor hours(Standard Rate - Actual Rate)
Actual Labor hours	9580
Standard Rate	14
Actual Rate	13.85
Direct Labor Rate Variance	1437	Favorable

Labor Efficiency Variance	Statndard Rate(Standard Hours - Actual Hours)
Standard Rate	14
Standard Hours	10600
Actual Hours	9580
Labor Efficiency Variance	14280	Favorable

Variable Cost
Manufacturing Overhead Spending Variance	(Actual hours worked × Actual rate) – (Actual hours worked × Standard rate)
Actual Hours	9580
Actual rate	11.03
Standard rate	13
Manufacturing Overhead Spending Variance	18888	Favorable

Manufacturing Overhead volume Variance	(Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate)
Actual Hours	9580
Actual rate	11.03
Standard rate	13
Standard Hours	10600
Manufacturing Overhead volume Variance	13260	Favorable

Fixed Overhead Prce Variance	Budgeted Overhead - Actual Overhead
Actual Overhead ( 173200*39%)	67548
Budgeted Overhead
Total Overhead	173550
Less: Variable Overhead ( 39000*0.2 *$13)	101400
Budgeted Fixed Overhead	72150
Fixed Overhead Prce Variance	=72150-67548
	4602 Favorable

Fixed overhead production volume variance = Budgeted overhead - Absorbed overhead

Absorbed overhead = $72150 / 39000 * 53,000 = $98050

Fixed overhead production volume variance = $72150 - 98050 = $25900 Favorable

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