Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2020. Costs and Production Data Actual Standard Raw materials unit cost $2.10 $1.95 Raw materials units 11,100 10,300 Direct labor payroll $150,000 $145,350 Direct labor hours 15,000 15,300 Manufacturing overhead incurred $232,308 Manufacturing overhead applied $235,008 Machine hours expected to be used at normal capacity 43,500 Budgeted fixed overhead for June $69,600 Variable overhead rate per machine hour $3.20 Fixed overhead rate per machine hour $1.60 Overhead is applied on the basis of standard machine hours. 3.20 hours of machine time are required for each direct labor hour. The jobs were sold for $458,000. Selling and administrative expenses were $42,000. Assume that the amount of raw materials purchased equaled the amount used.

Your answer is partially correct. Try again. Compute all of the variances for (1) direct materials and (2) direct labor. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.) (1) Total materials variance $

		Materials price variance		$

		Materials quantity variance		$

(2)		Total labor variance		$

		Labor price variance		$

		Labor quantity variance		$

Show List of Accounts Link to Text Link to Video

Your answer is incorrect. Try again. Compute the total overhead variance. Total overhead variance $

Answer 1

(a) Compute all of the variances for (1) direct materials and (2) direct labor.

(b) Compute the total overhead variance.

(a)   1.    Total materials variance:

(  AQ  X  AP ) (11100 X $2.10) $23310

– –

(  SQ  X  SP ) (10300 X $1.95) $20085

=

$3225 U

               Materials price variance:

(  AQ  X  AP ) (11100 X $2.10) $23310

– –

(  AQ  X  SP ) (11100 X $1.95) $21645

=

$1665 U

               Materials quantity variance:

(  AQ  X  SP ) (11100  X $1.95) $21645

– –

(  SQ  X  SP ) (10300 X $1.95) $20085

=

$1560 U

       2.   Total labor variance:

( AH  X  AR ) (15000 X $10*) $150000

– –

(  SH  X  SR ) (15300 X $9.5**) $145350

=

$4650 U

*$150000 / 15000 = 10    **$145350 ÷ 15300 = 9.5

               Labor price variance:

( AH  X  AR ) (15000 X $10*) $150000

– –

( AH   X  SR ) (15000 X $9.5) $142500

=

$7500 U

               Labor quantity variance:

(AH  X  SR ) (15000 X $9.5) $142500

– –

(  SH  X  SR ) (15300 X $9.5) $145350

=

$2850 F

(b)          Total overhead variance:

Actual Overhead $232308

– –

Overhead Applied $235008 (48960* X $4.80**)

=

$2700 F

*Overhead is applied on the basis of standard machine hours. 3.20 hours of machine time are required for each direct labor hour.         

      *15300 X 3.20 = 48960 machine hours

**Overhead rate

Variable overhead rate per machine hour	$3.20
Fixed overhead rate per machine hour	$1.60
Overhead rate	$4.8