Question

The following data were drawn from the records of Campbell Corporation.

Planned volume for year (static budget)		3,900	units
Standard direct materials cost per unit		3.60	pounds	@	$	2.00	per pound
Standard direct labor cost per unit		2.80	hours	@	$	4.00	per hour
Total expected fixed overhead costs	$	21,840
Actual volume for the year (flexible budget)		4,200	units
Actual direct materials cost per unit		3.00	pounds	@	$	2.30	per pound
Actual direct labor cost per unit		3.10	hours	@	$	3.50	per hour
Total actual fixed overhead costs	$	17,640

Required

Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity.

Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).

Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours.

Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).

Calculate the predetermined overhead rate, assuming that Campbell uses the number of units as the allocation base.

Calculate the fixed cost spending variance. Indicate whether the variance is favorable (F) or unfavorable (U).

Calculate the fixed cost volume variance. Indicate whether the variance is favorable (F) or unfavorable (U).

Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity. (Round "Standard price" and "Actual price" to 2 decimal places.)

	Materials Variance Information Table Standard price per pound Actual price per pound Standard quantity for flexible budget pounds Actual quantity used pounds

Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

	Material price variance Material usage variance

Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours. (Round "Standard price" and "Actual price" to 2 decimal places.)

	Labor Variance Information Table Standard price per hour Actual price per hour Standard hours for flexible budget Actual hours used

Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

	Labor price variance Labor usage variance

Calculate the predetermined overhead rate, assuming that Campbell uses the number of units as the allocation base. Calculate the fixed cost spending variance and the fixed cost volume variance. Indicate whether the variance is favorable (F) or unfavorable (U). (Round "Predetermined overhead rate" answer to 2 decimal places. Select "None" if there is no effect (i.e., zero variance).)

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	e. Predetermined overhead rate per unit f. Fixed cost spending variance g. Fixed cost volume variance

Answer 1

Solution a&b:

Materials Variance Information Table
Standard price	$2.00	per pound
Actual price	$2.30	per pound
Standard quantity for flexible budget	15120	pounds
Actual quantity used	12600	pounds

Material price variance = (SP - AP) * AQ = ($2 - $2.30) * 12600 = $3,780 U

Material usage variance = (SQ - AQ) * SP = (15120 - 12600) * $2 = $5,040 F

Solution c&d:

Labor Variance Information Table
Standard price	$4.00	per hour
Actual price	$3.50	per hour
Standard hours for flexible budget	11760
Actual hours used	13020

Labor price variance = (SP - AP) * AH = ($4 - $3.50) * 13020 = $6,510 F

Labor usage variance = (SH - AH) * SP = (11760 - 13020) * $4 = $5,040 U

Solution e, f and g:

Predetermined overhead rate = Budgeted fixed overhead / Budgeted nos of units = $21,840 /3900 = $5.60 per unit

Budgeted fixed cost = $21,840

Actual fixed costs = $17,640

Fixed cost applied = Actual nos of units * Predetermined overhead rate = 4200 * 5.60 = $23,520

Fixed cost spending variance = Budgeted fixed cost - Actual fixed cost = $21,840 - $17,640 = $4,200 F

Fixed cost volume variance = Fixed cost applied - Budgeted fixed cost = $23,520 - $21,840 = $1,680 F