Question

Hector Company has developed the following standard costs for its product for 2019:

HECTOR COMPANY Standard Cost Card

Product A

Cost Element

Standard Quantity

×

Standard Price

=

Standard Cost

Direct materials

4 pounds

$3

$12

Direct labor

3 hours

8

24

Manufacturing overhead

3 hours

4

12

$48

The company expected to produce 30,000 units of Product A in 2020 and work 90,000 direct labor hours.

Actual results for 2020 are as follows:
•		31,000 units of Product A were produced.
•		Actual direct labor costs were $746,200 for 91,000 direct labor hours worked.
•		Actual direct materials purchased and used during the year cost $346,500 for 126,000 pounds.
•		Actual variable overhead incurred was $155,000 and actual fixed overhead incurred was $205,000.

Compute the following variances showing all computations to support your answers. Indicate whether the variance are favorable or unfavorable?

(a)		Materials Quantity Variance		$	UnfavorableNot ApplicableFavorable
(b)		Total Direct Labor Variance		$	FavorableNot ApplicableUnfavorable
(c)		Direct Labor Quantity Variance		$	UnfavorableFavorableNot Applicable
(d)		Direct Materials Price Variance		$	UnfavorableNot ApplicableFavorable
(e)		Total Overhead Variance		$	Not ApplicableFavorableUnfavorable

Answer 1