Question

1.

Use the information provided to create a standard cost card for production of one glove box switch. To make one switch it takes 16 feet of plastic-coated copper wire and 0.5 pounds of plastic material. The plastic material can usually be purchased for $19.00 per pound, and the wire costs $2.40 per foot. The labor necessary to assemble a switch consists of two types. The first type of labor is assembly, which takes 3.5 hours. These workers are paid $27.00 per hour. The second type of labor is finishing, which takes 1 hours. These workers are paid $29.00 per hour. Overhead is applied using labor hours. The variable overhead rate is $14.80 per labor hour. The fixed overhead rate is $15.60 per hour. Round your answer to two decimal places.

Standard Cost

$

2

Thing One Company has the following information available for the past year. They use machine hours to allocate overhead.

Actual total overhead	$75,540
Actual fixed overhead	$32,500
Actual machine hours	10,000
Standard hours for the units produced	9,400
Standard variable overhead rate	$4.60

What is the variable overhead efficiency variance? Enter the amount as positive number.

Variable overhead efficiency variance

$

Favorable

3.

A manufacturer planned to use $76 of variable overhead per unit produced, but in the most recent period, it actually used $72 of variable overhead per unit produced. During this same period, the company planned to produce 400 units but actually produced 450 units.

What is the variable overhead spending variance? Enter the amount as positive number.

Variable overhead spending variance

$

Favorable

4

Actual price paid for material	$1.00
Standard price for material	$0.80
Actual quantity purchased and used in production	90
Standard quantity for units produced	110
Actual labor rate per hour	$16
Standard labor rate per hour	$14
Actual hours	200
Standard hours for units produced	230

A. Compute the material price and quantity, and the labor rate and efficiency variances. Enter all amounts as positive numbers.

Material price variance	$	Unfavorable
Material quantity variance	$	Favorable
Labor rate variance	$	Unfavorable
Labor efficiency variance	$	Favorable

B. What are some possible causes for this combination of favorable and unfavorable variances?

We paid more for our raw material, and assembly cost more per hour than expected.

Answer 1

Question 1

	A	B	C=A*B
Particulars	Quantity	Rate per Unit	Total Cost
Materials
Copper Wire	16 Feet	$ 2.4 per Feet	38.40
Plastic Material	0.5 Pounds	$ 19 per Pound	9.50
Labour
Type 1 Labour	3.5 Hours	$ 27 per Hour	94.50
Type 2 Labour	1 Hour	$ 29 per Hour	29
Variable Manufacturing Overhead	4.50 Hours	14.80	66.60
Fixed Manufacturing Overhead	4.50 Hours	15.60	70.20
Standard Cost per Unit			308.20

Total Labour Hours for Variable and Fixed Overhead = 3.5 Hours + 1 Hour

= 4.5 Hours

Question 2

Variable Overhead Efficiency Variance = (Standard Variable Overhead Rate * Standard Hours for Actual Production) - (Standard Variable Overhead Rate per Hour * Actual Hours)

Standard Variable Overhead Rate per Hour = $ 4.60

Standard Hours for Actual Production = 9,400 Hours

Actual Hours = 10,000 Hours

Variable Overhead Efficiency Variance = (9,400 * 4.60) - (10,000 * 4.60)

Variable Overhead Efficiency Variance = ( $ 2,760) Unfavorable Variance

Question 3

Variable Overhead Spending Variance = (Standard Variable Overhead Rate per Unit * Actual Hours - (Actual Hours * Actual Overhead Rate per Unit)

Standard Variable Overhead Rate =$ 76 per Unit

Actual Variable Overhead Rate = $ 72

Actual Units = 450 Units

Variable Overhead Spending Variance = (76 * 450) - (72 * 450

Variable Overhead Spending Variance = $ 1,800 Favourable Variance

Question

4A

Materials Price Variance = (Standard Materials Rate - Actual Material Rate) * Actual Quantity of Material Consumed

Standard Materials Rate = $ 0.80

Actual Material Rate = $ 1

Actual Quantity of Material Consumed =90

Materials Price Variance = (0.80 - 1) * 90

Materials Price Variance = ($ 18) Unfavorable Variance

Materials Quantity Variance =(Standard Quantity of Material for Actual Output - Actual Quantity Consumed) * Standard Materials Rate

Standard Materials Rate = $ 0.80

Standard Quantity of Material for Actual Output = 110

Actual Quantity Used = 90

Materials Quantity Variance = (110 - 90) * 0.80

Materials Quantity Variance = $ 16 Favourable Variance

Labour Rate Variance = (Standard Labour Hour Rate - Actual Labour Hour Rate) * Actual Labour Hours

Standard Labour Rate = $ 14

Actual Labour Rate = $ 16

Actual Labour Hours Worked = 200

Labour Rate Variance = (14-16) * 200

Labour Rate Variance = ($ 400) Unfavorable Variance

Labour Efficiency Variance = (Standard Labour Hour for Actual Output - Actual Labour Hours ) * Standard Labour Rate per Hour

Standard Labour Rate per Hour = $ 14

Actual Labour Hours = 200

Standard Labour Hours for Actual Output = 230

Labour Efficiency Variance = (230 - 200) * 14

Labour Efficiency Variance =. $ 420 Favourable Variance

Question 4B

The Possible reason for the Variances are as follows

1. Actual Rate for Materials and Labour Hour were more than that of the Standard set by the company due to which company has to pay more than expected and Variance exist.

2. Company website efficient in using its Raw materials and labour due to which it has performed better in real in terms of productivity due to which Efficiency Variance are in the favour of the company.