Question

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—1 pound plastic at $6 per pound $ 6.00

Direct labor—2.00 hours at $11.85 per hour 23.70

Variable manufacturing overhead 12.00

Fixed manufacturing overhead 12.00

Total standard cost per unit $53.70

The predetermined manufacturing overhead rate is $12 per direct labor hour ($24.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,800 direct labor hours (5,900 units) for the month. The master budget showed total variable costs of $70,800 ($6.00 per hour) and total fixed overhead costs of $70,800 ($6.00 per hour). Actual costs for October in producing 3,700 units were as follows.

Direct materials (3,890 pounds) $ 23,729

Direct labor (7,300 hours) 87,965

Variable overhead 63,934

Fixed overhead 26,966

Total manufacturing costs $202,594

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

Total materials variance $ =

Materials price variance $ =

Materials quantity variance $ =

Total labor variance $ =

Labor price variance $ =

Labor quantity variance $ =

(b) Compute the total overhead variance.

Total overhead variance $ =

Answer 1

a). Actual Direct materials = $ 23,729;

Total actual cost per unit= $ 23,729/3890

=$6.1 per unit actual manufacturing cost

i).Total Material Variance= Standard price*Standard Quantity - Actual Price*Actual Quantity

     =6*3700-6.1*3890 unfavourable

=22200-23729

Total Material Variance = $(1529) unfavourable   

ii) Material Price Variance = (Standard Price-Actual Price)*Actual Quantity

=$(6-6.1)*3890

Material Price Variance = ($389) unfavourable

iii).Material Quantity Varinace= (Standard Quantity-Actual Quantity)*$Standard Price

=(3700-3890)*6

Material Quantity Varinace=($1140) unfavourable

iv) Total labor variance $ = Standard Hour*Standard Rate-Actual Hour*Actual Rate

=2*3700*11.85-7300*12.05

=87690-87965

Total labor variance $=$(275) unfavourable

v)Labor price variance $ =(Standard Rate-Actual Rate)*Actual Hour

=(11.85-12.05)*7300

Labor price variance $=($1460) unfavourable

vi) Labor quantity variance $ = (Standard Hour-Actual Hour)* Standard Rate

=(7400-7300)*11.85

Labor quantity variance =$1185 favourable

b). Fixed manufacturing variance

Actual Fixed manufacturing cost Flexible Budget fixed overhead Fixed overhead applied

$26966 2*3700*($6 per hour) 7300*($6 per hour)

=($17434) $600

=($16834) unfavourable

Fixed manufacturing overhead variance = $16834

ii). Variable overhead variance

Actual variable overhead cost Actual hours at standard rate Standard variable overhead cost

$63934 7300*($6 per hour) 2*3700*($6 per hour)

$20134 ($600)

Variable overhead variance =$19534 favourable

Total Overhead variance=  Variable overhead variance+Fixed manufacturing overhead variance

=19534+(16834)

Total Overhead variance = $2700 favourable