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		7.9	ounces	$	8.00	per ounce
Direct labor		0.5	hours	$	25.70	per hour
Variable manufacturing overhead		0.5	hours	$	6.30	per hour

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

Actual output		7,500	units
Raw materials purchased		63,010	ounces
Actual cost of raw materials purchased	$	379,910
Raw materials used in production		59,260	ounces
Actual direct labor-hours		3,440	hours
Actual direct labor cost	$	92,520
Actual variable overhead cost	$	21,034

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.)

a	materials price variance	____	____
b	materials quantity variance	____	____
c	labor rate variance	____	____
d	labor efficiency variance	____	____
e	variable overhead rate variance	____	____
f	variable overhead efficiency variance	____	____

Answer 1

• Working data

Actual DATA for		7500	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	63010	$                   6.03	$        379,910.00
Direct labor	3440	$                26.90	$           92,520.00
Variable Overhead	3440	$                   6.11	$           21,034.00

Standard DATA for		7500	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 7.9 ounces x 7500 units)=59250 ounces	$                   8.00	$     474,000.00
Direct labor	( 0.5 hours x 7500 units)=3750 hours	$                25.70	$       96,375.00
Variable Overhead	( 0.5 hours x 7500 units)=3750 hours	$                   6.30	$       23,625.00

• [a]

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                8.00	-	$                       6.03	)	x	63010
	124170
	Variance		$          124,170.00			Favourable-F

OR

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                8.00	-	$                       6.03	)	x	59260
	116780.1016
	Variance		$          116,780.10			Favourable-F

• [b]

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	59250	-	59260	)	x	$                           8.00
	-80
	Variance		$                    80.00			Unfavourable-U

• [c]

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              25.70	-	$                    26.90	)	x	3440
	-4112
	Variance		$              4,112.00			Unfavourable-U

• [d]

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3750	-	3440	)	x	$                        25.70
	7967
	Variance		$              7,967.00			Favourable-F

• [e]

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                6.30	-	$                       6.11	)	x	3440
	638
	Variance		$                  638.00			Favourable-F

• [f]

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3750	-	3440	)	x	$                           6.30
	1953
	Variance		$              1,953.00			Favourable-F