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		7.0	ounces	$	7.10	per ounce
Direct labor		0.5	hours	$	31.70	per hour
Variable manufacturing overhead		0.5	hours	$	5.40	per hour

The company has reported the following actual results for the product for April:

Actual output		8,500	units
Raw materials purchased		61,970	ounces
Actual cost of raw materials purchased	$	331,880
Raw materials used in production		59,510	ounces
Actual direct labor-hours		3,050	hours
Actual direct labor cost	$	99,480
Actual variable overhead cost	$	15,483

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

a. Material price variance = (Actual price - Standard price) * Actual quantity

Material price variance = ($331,880/61,970 - $7.10) * 61,970

Material price variance = ($5.36 - $7.10) * 61,970 = $107,828 Favorable

b. Material quantity variance = (Standard quantity - Actual quantity) * Standard price

Material quantity variance = (8,500*7 - 59,510) * $7.10

Material quantity variance = (59,500 - 59,510) * $7.10 = $71 Unfavorable

c. Labor rate variance = (Actual rate - Standard rate) * Actual hours

Labor rate variance = ($99,480/3,050 - $31.70) * 3,050

Labor rate variance = ($32.62 - $31.70) * 3,050 = $2,806 Unfavorable

d. Labor efficiency variance = (Standard hours - Actual hours) * Standard rate

Labor efficiency variance = (8,500*0.5 - 3,050) * $31.70

Labor efficiency variance = (4,250 - 3,050) * $31.70 = $38,040 Favorable

e. Variable overhead rate variance = (Actual rate - Standard rate) * Actual hours

Variable overhead rate variance = ($15,483/3,050 - $5.40) * 3,050

Variable overhead rate variance = ($5.08 - $5.40) * 3,050 = $976 Favorable

f. Variable overhead efficiency variance = (Standard hours - Actual hours) * Standard rate

Variable overhead efficiency variance = (4,250 - 3,050) * $5.40 = $6,480 Favorable