In: Accounting
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 | 8.8 | ounces | $ | 6.90 | per ounce | ||||||
Direct labor | 0.5 | hours | $ | 29.70 | per hour | ||||||
Variable manufacturing overhead | 0.5 | hours | $ | 5.20 | per hour | ||||||
The company has reported the following actual results for the product for April:
Actual output | 6,400 | units | |
Raw materials purchased | 58,240 | ounces | |
Actual cost of raw materials purchased | $ | 326,720 | |
Raw materials used in production | 56,350 | ounces | |
Actual direct labor-hours | 3,000 | hours | |
Actual direct labor cost | $ | 93,290 | |
Actual variable overhead cost | $ | 14,650 | |
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.)
calculation of direct material price variance: |
= (Standard price per unit of material - Actual price per unit of material) × Actual quantity |
= ($6.90 - $5.61 ) × 58240 = $75136 F |
* Actual Cost /Unit= $326720/58240=5.61 |
Calculation of direct material quantity variance |
=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit |
((8.8 X 6400Unit)-56350 Unit )X $6.90 = $207 U |
Calculation of direct labor rate variance |
= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used |
= ($29.70/hour - $31.10/hour) × 3000 Hours= $4190 U |
Actual Rate rate per Hour= 93290/3000 |
Calculation of direct labor efficiency variance: |
= (standard hours required for actual production - actual hours used) × standard Rate |
= (0.5Hour × 6400 Unit -3000) × $29.70 = $5940 F |
Calculation of Variable OH rate variance |
= (Standard Variable OH per hour - actual variable OH per hour) × Actual hours used |
= ($5.20/hour - $4.88/hour) × 3000 Hours= $950 F |
* Actual Cost /Hour= $14650/3000=$4.88/Hour |
Calculation of Variale OH efficiency variance: |
= (standard hours required for actual production - actual hours used) × standard Rate |
= (0.5Hour × 6400 Unit -3000) × $5.20 = $1040 F |