Question

In: Accounting

): Mandas Inc. has provided the following data concerning one of the products in its standard...

): Mandas Inc. has provided the following data concerning one of the products in its standard cost system.   Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

     Inputs                                            Standard Quantity of Output         Standard Price or Rate

      or Hours per Unit

Direct materials                                                7.80        liters                                     $ 7.40    per liter

Direct labor                                                        0.40        hours                                    $25.70   per hour

Variable manufacturing overhead            0.40        hours                                    $ 6.30    per hour

The company has reported the following actual results for the product for September:   

                                               

Actual output                                                                   10,000   units

Raw materials purchased                                            78,500   liters

Actual cost of raw materials purchased                 $586,395             

Raw materials used in production                            78,020   liters

Actual direct labor-hours                                             3,800     hours

Actual direct labor cost                                                 $100,320             

Actual variable overhead cost                                     $ 20,330              

               

Required:

a. Compute the materials price variance for September.

b. Compute the materials quantity variance for September.

c. Compute the labor rate variance for September.

d. Compute the labor efficiency variance for September.

e. Compute the variable overhead rate variance for September.

f. Compute the variable overhead efficiency variance for September.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).    

Solutions

Expert Solution

calculation of direct material price variance:
= (Standard price per unit of material - Actual price per unit of material) × Actual quantity
= ($7.40/Litre - $7.47/Litre ) × 78500Litre = $5495 UF
* Actual price/Litre= 586395/78500= $6.4 per Yards
Calculation of direct material quantity variance
=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit
((7.80Litre X 10000 Unit)-78020 Litre )X $7.40 = $148 UF
Calculation of direct labor rate variance
= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used
= ($25.70/hour - $26.40/hour) ×3800 Hours= $2660U F
*Actual Rate per Hour= 100320/ 3800=$26.40 per Hour
Calculation of direct labor efficiency variance:
= (standard hours required for actual production - actual hours used) × Std Hourly Rate
= (0.4 Hour × 10000 Unit - 3800) × $25.70 = $5140 F
Calculation of Variable OH rate variance
= (Standard Variable OH rate per hour - actual Variable OH rate per hour) × Actual hours used
= ($6.30/hour - $5.35/hour) ×3800 Hours= $3610 F
*Actual Rate = $20330/3800=$5.35/ Hour
Calculation of Vaaariable OH efficiency variance:
= (standard hours required for actual production - actual hours used) × Std Hourly Rate
= (0.4 Hour × 10000 Unit - 3800) × $6.30 = $1260 F

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