Question

Concord Irrigation, Inc. is known throughout the world for its H2O-X high-capacity water pump, used in irrigation systems. The pump’s standard cost is as follows. The company’s predetermined fixed overhead rate is based on an expected capacity of 100,000 direct labor hours per month.

		Standard Price		Standard Quantity		Standard Cost
Direct materials		$5 per pound		14 pounds		$70
Direct labor		$9 per DLH		4 DLH		36
Variable overhead		$8 per DLH		4 DLH		32
Fixed overhead		$5 per DLH		4 DLH		20
						$158

During the month of September, the company produced 22,010 of the 25,000 pumps that had been scheduled for production in the budget. The company used 356,000 pounds of material during September. The direct labor payroll for the month was $694,300 for 94,900 direct labor hours. Variable overhead costs were $746,600; fixed overhead costs were $463,500. The company’s purchasing agent signed a new supply contract that resulted in purchases of 469,100 pounds of direct materials at a total price of $2,157,860.

Calculate Concord’ direct materials, direct labor, and overhead variances for September. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 5,725. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Direct materials price variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          Not ApplicableUnfavorableFavorable
Direct materials quantity variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          Not ApplicableUnfavorableFavorable
Direct labor rate variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          Not ApplicableFavorableUnfavorable
Direct labor efficiency variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          Not ApplicableFavorableUnfavorable
Variable overhead spending variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          Not ApplicableFavorableUnfavorable
Variable overhead efficiency variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          FavorableUnfavorableNot Applicable
Fixed overhead spending variance		$enter a dollar amount rounded to 0 decimal places	select an option                                                          Not ApplicableFavorableUnfavorable

Answer 1

Fixed Spending Overhead Variance = Actual Fixed Overhead Costs - Budgeted Fixed Overhead

Fixed Spending Overhead Variance = $463,500 - (100,000 Hours * $5 per Hour) = $36,500 (Favorable)