Question

Java Gourmet Coffee

Java Gourmet Coffee reports the following data for April 2010 where 200,000 pounds of roasted gourmet coffee beans were actually produced (note: standard costs do not allow for any wastage),

Actual:

	Direct Materials:
	Quantity of coffee beans:	210,000 pounds
	Cost per pound:	$0.60 per pound
	Direct Labor:
	Direct labor rate:	$19.00 per hour
	Labor hours used:	13,000 hours
	Variable Overhead:
	Actual costs:	$21,600

Standard:

	Direct Materials:
	Quantity of coffee beans:	200,000 pounds
	Cost per pound:	$0.50 per pound
	Direct Labor:
	Direct labor rate:	$20.00 per hour
	Labor hours to be used:	0.05 hours per pound
	Variable overhead:	$.10 per pound

22.       Refer to Java Gourmet Coffee. Calculate the direct labor efficiency variance.

a.	$60,000 U
b.	$13,000 U
c.	$13,000 F
d.	$9,500 U

23.       Refer to Java Gourmet Coffee. Calculate the variable manufacturing overhead variance.

a.	$1,000 U
b.	$2,000 U
c.	$1,000 F
d.	$2,000 F

Answer 1

• Working

Actual DATA for		200000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	210000	$                   0.60	$        126,000.00
Direct labor	13000	$                19.00	$        247,000.00

Standard DATA for		200000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1 yards x 200000 units)=200000 yards	$                   0.50	$     100,000.00
Direct labor	( 0.05 hours x 200000 units)=10000 hours	$                20.00	$     200,000.00

• Direct Labor Efficiency Variance
  Correct Answer = Option ‘A’ $ 60000 U

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	10000	-	13000	)	x	$                        20.00
	-60000
	Variance		$            60,000.00			Unfavourable-U

• Variable manufacturing overhead variance
  Correct Answer = $ 1600 U [None of the Option]

Variable Overhead Variance
(	Standard Cost = 200000 pounds x 0.10	-	Actual Cost	)
(	$                      20,000.00	-	$            21,600.00	)
	-1600
	Variance		$              1,600.00			Unfavourable-U