In: Accounting
The following summary data relate to the operations of Beckett Company for July, during which 12,000 finished units were produced: Direct material: Standard (0.8 lb. @ $6.00/lb.) Actual (8,500 lb. @ $6.25/lb.) Direct labor: Standard (1 hr. @ $16.00/hr.) Actual (12,700 hrs. @ $15.60/hr.) Variable overhead: Standard (1 hr. @ $10.00/hr.) Actual ($121,000) Required: Compute the following variances and indicate whether each is favorable (F) or unfavorable (U). 1. Materials price variance 2. Materials efficiency variance 3. Labor rate variance 4. Labor efficiency variance 5. Variable overhead spending variance 6. Variable overhead efficiency variance
1 | Materials price variance | $2125 | Unfavorable |
(AQ x AP) - (AQ x SP) = (8500 x $6.25) - (8500 x $6.00) = $2125 | |||
2 | Materials efficiency variance | $6600 | Favorable |
(AQ x SP) - (SQ x SP) = (8500 x $6.00) - (9600 x $6.00) = $-6600 | |||
SQ = 12000 units x 0.8 lb. = 9600 lb. | |||
3 | Labor rate variance | $5080 | Favorable |
(AH x AR) - (AH x SR) = (12700 x $15.60) - (12700 x $16.00) = $-5080 | |||
4 | Labor efficiency variance | $11200 | Unfavorable |
(AH x SR) - (SH x SR) = (12700 x $16.00) - (12000 x $16.00) = $11200 | |||
SH = 12000 units x 1 hour = 12000 hours | |||
5 | Variable overhead spending variance | $6000 | Favorable |
(AH x AR) - (AH x SR) = $121000 - (12700 x $10.00) = $-6000 | |||
6 | Variable efficiency variance | $7000 | Unfavorable |
(AH x SR) - (SH x SR) = (12700 x $10.00) - (12000 x $10.00) = $7000 |