In: Accounting
): 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).
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 |