Question

In: Accounting

Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is...

Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is applied on the basis of direct labor hours. The following information is given:

Standard costs per unit:
Raw Materials (1.5 grams x $16 per gram) . . . . . . . . . $ 24.00

Direct Labor (0.75 hours x $8 per hour) . . . . . . . . . . . . $ 6.00

Variable Overhead (0.75 x $3 per hour) . . . . . . . . . . . . $ 2.25

Actual experience for current year:
Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 units

Purchases of raw materials (21,000 grams x $17 per gram$357,000

Raw Materials Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33,400 grams

Direct Labor (16,750 hours x $8 per hour) . . . . . . . . . . . . . . . . $134,000

Variable overhead cost incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,575

Other Calculations:

ACTUALPURCHASED QUANTITY = 21,000 GRAMS Actual Price = $17 per gram

ACTUAL USED QUANTITY = 33,400 grams

Standard Used Quantity = 33,600 grams Standard Price $ 16 per gram

Actual Labor Hours = 16,750 hours Actual Labor Rate = $8 per hour

Standard Labor Hours = 16,800 hours Standard labor rate $8 per hour

Actual overhead hours = 16,750 hours Actual overhead rate = $2.90 per hour

Standard Hours for overhead 16,800 hoursStandard overhead rate $3 per hour

Required: 30 POINTS
Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:
a. Direct materials price variance.____________
b. Direct materials quantity variance.____________
c. Labor rate variance.___________
d. Labor efficiency variance.___________
e. Variable overhead rate variance.____________
f. Variable overhead efficiency variance. ____________

Solutions

Expert Solution

Ans. A Materials price variance = (Standard price * Actual quantity purchased) - Actual materials purchased cost
($16 * 21,000) - $357,000
$336,000 - $357,000
-$21,000 or   $21,000 unfavorable
Ans. B Materials quantity variance = (Standard quantity - Actual quantity used) * Standard price
(33,600 - 33,400) * $16
200 * $16
$3,200 Favorable
Ans. C Labor rate variance = (Standard rate * Actual hours) - Actual labor cost
($8 * 16,750) - $134,000
$134,000 - $134,000
$0
Ans. D Labor efficiency variance = (Standard hours - Actual hours) * Standard rate
(16,800 - 16,750) * $8
50 * $8
$400 Favorable
Ans. E Variable overhead is based on direct labor hours, therefore in the calculation of
variable overhead variances, the standard and actual direct labor hours will remain same.
Variable Overhead rate variance = (Standard rate * Actual hours) - Actual variable overhead cost
($3 * 16,750) * $48,575
$50,250 * $48,575
$1,675 Favorable
Ans. F Variable overhead efficiency variance = (Standard hours - Actual hours) * Standard rate
(16,800 - 16,750) * $3
50 * $3
$150 Favorable

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