Question

etermining Unit Costs, Variance Analysis, and Interpretation Happy Dog Company, a manufacturer of dog food, produces its product in 1,000-bag batches. The standard cost of each batch consists of 8,000 pounds of direct materials at $0.60 per pound, 48 direct labor hours at $13.25 per hour, and variable overhead cost (based on machine hours) at the rate of $15 per hour with 16 machine hours per batch. The following variable costs were incurred for the last 1,000-bag batch produced: Direct materials . . . . . . . . . . . . . . . . 8,300 pounds costing $4,731 were purchased and used Direct labor. . . . . . . . . . . . . . . . . . . . 45 hours costing $675 Variable overhead. . . . . . . . . . . . . . . $338 Machine hours used. . . . . . . . . . . . . 18 hours Required

b. For the last 1,000-bag batch, determine the standard cost variances for direct materials, direct labor, and variable overhead.

Answer 1

Material Variance:
Std qty allowed: 8000
Actual qty : 8300
Std price = 0.60
Actual material cost =4731
Material price variance = Actual qty*Std price -Actual material ccost
		8300*0.60 - 4731 =249 Fav
Material Qty variance = Std price (Std qty-Actual qty)
		0.60 (8000-8300) = 180 Unfav
Labour variance:
Std labour hours = 48
Actual hours: 45
Std rate per hour: 13.25
Actual labour cost = 675
Labour rate variance = Actual hours*Std rate -Actual labour cost
		45 *13.25 - 675 = 78.75 unfav
Labour efficiency variance = Std rate (Std hrs-Actual hrs)
		13.25 (48-45) = 39.75 fava
Variable OH variance:
Std MH allowed: 16 MH
Actual MH allowed: 18 MH
Std OH rate per MH: 15
Actual OH incurred: 338
Variable OH rate variance = Std rate*Actual MH - Actual Oh incurred
		15*18 - 338 = 68 Unfav
Variable OH efficiency variance= Std rate (Std MH -Actual MH)
			15 (16 - 18 ) = 30 Unfav