Question

In: Accounting

Landram Corporation makes a product with the following standard costs: Inputs Standards Quantity or Hours Standard...

Landram Corporation makes a product with the following standard costs:

Inputs Standards Quantity or Hours Standard Price or Rate
Direct Materials 2.0 kilos $7.00 per kilo
Direct labor 0.5 hours $19.00 per hour
Variable overhead 0.5 hours $5.00 per hour



  

In March the company produced 4,700 units using 10,230 kilos of the direct material and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the actual variable overhead cost was $11,934.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased

Compute the materials quantity variance, materials price variance, labor efficiency variance,

Labor rate variance, variable overhead efficiency variance and variable overhead rate

variance.

Solutions

Expert Solution

Solution

Material Price Variance $           1,080.00 Unfavourable-U
Material quantity variance $           9,800.00 Unfavourable-U

.

Labor rate variance   $           3,757.00 Favourable-F
Labor Efficiency variance $           2,660.00 Favourable-F

.

Variable Overhead Rate Variance $               884.00 Unfavourable-U
Variable Overhead Efficiency Variance $               700.00 Favourable-F

Working

Actual DATA for 4700 Units
Quantity (AQ) Rate (AR) Actual Cost
Direct Material 10800 $            7.10 $          76,680.00
Direct labor 2210 $         17.30 $          38,233.00
Variable Overhead 2210 $            5.40 $          11,934.00

.

Standard DATA for 4700 Units
Quantity (SQ) Rate (SR) Standard Cost
[A] [B] [A x B]
Direct Material ( 2 kilo x 4700 Units)=9400 kilo $                   7.00 $            65,800.00
Direct labor ( 0.5 Hour x 4700 Units)=2350 Hour $                19.00 $            44,650.00
Variable Overhead ( 0.5 Hour x 4700 Units)=2350 Hour $                   5.00 $            11,750.00

.

Material Price Variance
( Standard Rate - Actual Rate ) x Actual Quantity
( $                    7.00 - $                        7.10 ) x 10800
-1080
Variance $                1,080.00 Unfavourable-U
Material Quantity Variance
( Standard Quantity - Actual Quantity ) x Standard Rate
( 9400 - 10800 ) x $              7.00
-9800
Variance $                9,800.00 Unfavourable-U

.

Labor Rate Variance
( Standard Rate - Actual Rate ) x Actual Labor Hours
( $                  19.00 - $                      17.30 ) x 2210
3757
Variance $                3,757.00 Favourable-F
Labour Efficiency Variance
( Standard Hours - Actual Hours ) x Standard Rate
( 2350 - 2210 ) x $           19.00
2660
Variance $                2,660.00 Favourable-F

.

Variable Overhead Rate Variance
( Standard Rate - Actual Rate ) x Actual Labor Hours
( $                    5.00 - $                        5.40 ) x 2210
$             (884.00)
Variance $                   884.00 Unfavourable-U
Variable Overhead Efficiency Variance
( Standard Hours - Actual Hours ) x Standard Rate
( 2350 - 2210 ) x $              5.00
$               700.00
Variance $                   700.00 Favourable-F

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