Question

Fortes 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 or Hours per Unit of Output			Standard Price or Rate
Direct materials		7.8	ounces	$	7.90	per ounce
Direct labor		0.5	hours	$	30.70	per hour
Variable manufacturing overhead		0.5	hours	$	6.20	per hour

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

Actual output		7,900	units
Raw materials purchased		62,550	ounces
Actual cost of raw materials purchased	$	375,430
Raw materials used in production		61,650	ounces
Actual direct labor-hours		3,530	hours
Actual direct labor cost	$	112,770
Actual variable overhead cost	$	20,899

Required:

a. Compute the materials price variance for April.

b. Compute the materials quantity variance for April.

c. Compute the labor rate variance for April.

d. Compute the labor efficiency variance for April.

e. Compute the variable overhead rate variance for April.

f. Compute the variable overhead efficiency variance for April.

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

Answer 1

a. Materials price variance = (Actual quantity purchased * Actual price) - (Actual quantity purchased * Standard price)

= $375,430 - (62,550 * $7.9)

= $118,715 Favorable

b. Materials quantity variance = (Actual quantity used * Standard price) - (Standard quantity * Standard price)

= (61,650 * $7.9) - (7,900 * 7.8 * $7.9)

= $237 Unfavorable

c. Labour rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= $112,770 - (3,530 * $30.7)

= $4,399 Unfavorable

d. Labour efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (3,530 * $30.7) - (7,900 * 0.5 * $30.7)

= $12,894 Favorable

e. Variable overhead rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= $20,899 - (3,530 * $6.2)

= $987 Favorable

f. Variable overhead efficiency variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (3,530 * $6.2) - (7,900 * 0.5 * $6.2)

= $2,604 Favorable