Question

#14

Handerson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		8.5	kilos	$	6.00	per kilo
Direct labor		0.4	hours	$	20.00	per hour
Variable overhead		0.4	hours	$	6.00	per hour

The company reported the following results concerning this product in August.

Actual output		3,200	units
Raw materials used in production		29,030	kilos
Purchases of raw materials		31,600	kilos
Actual direct labor-hours		1,160	hours
Actual cost of raw materials purchases	$	195,920
Actual direct labor cost	$	22,736
Actual variable overhead cost	$	7,540

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

The labor rate variance for August is:

Multiple Choice

$512 U

$512 F

$464 U

$464 F

#15

Kartman Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.5	pounds	$	7.00	per pound	$	45.50
Direct labor		0.6	hours	$	24.00	per hour	$	14.40
Variable overhead		0.6	hours	$	4.00	per hour	$	2.40

In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.

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

The variable overhead rate variance for June is:

Multiple Choice

$210 U

$210 F

$229 F

$229 U

Answer 1

• All working forms part of the answer
• Question #14

Labor Rate Variance = (Standard rate per hour – Actual rate per hour) x Actual labor hours

Actual rate per hour = Actual direct labor cost / Actual direct labor hours

= $ 22,736 / 1,160

= $ 19.60

Labor Rate Variance = ($ 20 per hour - $ 19.60 per hour) x 1,160 labour hours

= 0.4 x 1160

= $ 464 Favourable

Correct answer = Option #4: $ 464 F = Labor Rate variance

• Question #15

Working

Actual direct labor cost = $ 57,021
Actual direct labor hours = 2290

Actual variable overhead cost = $ 8,931

Actual variable overhead aret = Actual variable overhead cost / Actual direct labor hours

                = 8931 / 2290 = $ 3.9 labor hours

Answer calculation:

Variable overhead rate variance = (Standard rate per hour – Actual rate per hour) x Actual hours

= ($ 4 per hour - $ 3.9 per hour) x 2290 hours

= 0.1 x 2290

= $ 229 Favourable

Correct answer = Option #3: $ 229 F