Question

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.)

Answer 1

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