Question

22. Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead cost variance.

Direct labor standard (2.0 hrs. @ $13.40/hr.)	$	26.80		per finished unit
Actual direct labor hours		92,500		hrs.
Budgeted units		47,500		units
Actual finished units produced		45,500		units
Standard variable OH rate (2 hrs. @ $15.20/hr.)	$	30.40		per finished unit
Standard fixed OH rate ($589,000/47,500 units)	$	12.40		per unit
Actual cost of variable overhead costs incurred	$	1,379,200
Actual cost of fixed overhead costs incurred	$	470,000

Multiple Choice

• $20,750 unfavorable.

• $4,000 favorable.

• $21,100 unfavorable.

• $17,100 favorable.

23. Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock’s standard labor cost is $17 per hour. During August, Hassock produced 14,000 units and used 28,160 hours of direct labor at a total cost of $476,020. What is Hassock’s labor rate variance for August?

Multiple Choice

• $2,685 unfavorable.

• $2,685 favorable.

• $2,700 favorable.

• $5,385 favorable.

• $2,700 unfavorable.

• $20,750 favorable.

24.

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance.

Direct labor standard (2 hrs. @ $13.40/hr.)	$	26.80		per finished unit
Actual direct labor hours		100,500		hrs.
Budgeted units		51,500		units
Actual finished units produced		49,500		units
Standard variable OH rate (2 hrs. @ $16.40/hr.)	$	32.80		per finished unit
Standard fixed OH rate ($588,000/60,000 units)	$	9.80		per unit
Actual cost of variable overhead costs incurred	$	1,618,600
Actual cost of fixed overhead costs incurred	$	590,000

Multiple Choice

• $104,900 unfavorable.

• $16,400 unfavorable.

• $104,900 favorable.

• $21,400 favorable.

• $21,400 unfavorable.

25. Fletcher Company collected the following data regarding production of one of its products. Compute the standard quantity allowed for the actual output.

Direct materials standard (4 lbs. @ $2/lb.)	$	8		per finished unit
Actual direct materials used		155,000		lbs.
Actual finished units produced		38,000		units
Actual cost of direct materials used	$	308,000

Multiple Choice

• 304,000 pounds.

• 152,000 pounds.

• 38,000 pounds.

• 76,000 pounds.

• 155,000 pounds.

Answer 1

22. Variable overhead cost variance = Standard variable overhead cost - Actual variable overhead cost

= ($30.40 × 45,500) - $1,379,200
= $1,383,200 - $1,379,200
$4000 favourable.
Since actual variable cost is less than standard variable cost, it is favourable variance.

23. Labour rate variance = (Actual rate - Standard rate) x Actual hours worked

Actual rate = Actual labour cost/ actual labour hours = $476,020/28,160

Standard rate = $17

Let's apply the equation,
Labour rate variance = [($476,020/28,160) × $17] × 28,160
= $2,700 unfavourable.
Since actual direct labour cost is less than standard labour cost, it is unfavourable variance.

24. Fixed overhead cost variance = Fixed overhead absorbed - actual fixed overhead incurred

Fixed overhead absorbed = 49,500 × $9.80

Fixed overhead cost variance = ($49,500 × $9.80) - $590,000 = $109,400 unfavourable.
Actual fixed overhead is more than absorbed overhead. Hence it is unfavourable.

25. Standard quantity allowed = *standard quantity × standard price
= (38,000 × 4) × $2
= 152,000 × $2
= 304,000 pounds

* To produce 1 unit of finished product, the standard pounds required is 4. Hence to produce 38,000 units, the standard pounds needed is 38,000 × 4.