Question

Speed, Inc’s Standard Cost Card for jogging suits.

The standard cost for one jogging suit would be:

Standard Cost Card for Jogging Suits
	(1 ) Standard Quantity or Hours	(2) Standard Price or Rate		(1) × (2) Standard Cost
Direct materials.....................................	3.5 yards	$6	per yard	$21
Direct labor...........................................	2.0 hours	$18	per hour	36
Variable manufacturing overhead...........	2.0 hours	$4	per hour	8
Total standard cost per suit....................				$65

Direct Labor Information

The following data are for last month’s production:

Number of suits completed (as before)...........................................	5,000 units
Cost of direct labor (10,500 hours @ $20 per hour).........................	$210,000

Variable Manufacturing Overhead Information

The following data are for last month’s production:

Number of suits completed (as before)...............................	5,000 units
Actual direct labor-hours (as before)...................................	10,500 hours
Variable overhead costs incurred........................................	$40,950

Direct Material Information

The following data are for last month’s production:

Number of suits completed..................................	5,000 units
Cost of material purchased (20,000 yards × $5.40 per yard)	$108,000
Yards of material used........................................	20,000 yards

1. Calculate Direct Material Variances for price & quantity:

2. Calculate Direct Labor Variances for rate & efficiency:

3. Calculate Variable Overhead Variances for rate & efficiency:

Answer 1

Answer

• All working forms part of the answer
• Workings

Actual DATA for		5000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	20000	$                   5.40	$        108,000.00
Direct labor	10500	$                20.00	$        210,000.00
Variable Overhead	10500	$                   3.90	$           40,950.00

Standard DATA for		5000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 3.5 feet x 5000 units)=17500 feet	$                   6.00	$     105,000.00
Direct labor	( 2 hours x 5000 units)=10000 hours	$                18.00	$     180,000.00
Variable Overhead	( 2 hours x 5000 units)=10000 hours	$                   4.00	$       40,000.00

• Requirements, with calculations

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                6.00	-	$                       5.40	)	x	20000
	12000
	Variance		$            12,000.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	17500	-	20000	)	x	$                           6.00
	-15000
	Variance		$            15,000.00			Unfavourable-U

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              18.00	-	$                    20.00	)	x	10500
	-21000
	Variance		$            21,000.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	10000	-	10500	)	x	$                        18.00
	-9000
	Variance		$              9,000.00			Unfavourable-U

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                4.00	-	$                       3.90	)	x	10500
	1050
	Variance		$              1,050.00			Favourable-F
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	10000	-	10500	)	x	$                           4.00
	-2000
	Variance		$              2,000.00			Unfavourable-U