In: Accounting
Kropf 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 |
8.50 |
liters | $ | 8.10 | per liter | ||||||
Direct labor | 0.60 | hours | $ | 25.70 | per hour | ||||||
Variable manufacturing overhead | 0.60 | hours | $ | 7.00 | per hour | ||||||
The company has reported the following actual results for the product for September:
Actual output | 10,700 | units | |
Raw materials purchased | 93,100 | liters | |
Actual cost of raw materials purchased | $ | 771,500 | |
Raw materials used in production | 90,960 | liters | |
Actual direct labor-hours | 6,000 | hours | |
Actual direct labor cost | $ | 160,302 | |
Actual variable overhead cost | $ | 35,414 | |
Required:
a. Compute the materials price variance for September.
b. Compute the materials quantity variance for September.
c. Compute the labor rate variance for September.
d. Compute the labor efficiency variance for September.
e. Compute the variable overhead rate variance for September.
f. Compute the variable overhead efficiency variance for September.
(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.)
Solution
Material Price Variance | $ 17,390.00 | Unfavourable-U |
Material quantity variance | $ 81.00 | Unfavourable-U |
Labor rate variance | $ 6,102.00 | Unfavourable-U |
Labor Efficiency variance | $ 10,794.00 | Favourable-F |
Variable Overhead Rate Variance | $ 6,586.00 | Favourable-F |
Variable Overhead Efficiency Variance | $ 2,940.00 | Favourable-F |
Alternate answer for material variance
Material quantity variance = $17415 Unfavorable
Material Quantity Variance | ||||||
( | Standard Quantity | - | Actual Quantity | ) | x | Standard Rate |
( | 90950 | - | 93100 | ) | x | $ 8.10 |
-17415 | ||||||
Variance | $ 17,415.00 | Unfavourable-U |
Working
10700 | Units | ||
Quantity (AQ) | Rate (AR) | Actual Cost | |
Direct Material | 93100 | $ 8.29 | $ 771,500 |
Direct labor | 6000 | $ 26.72 | $ 160,302 |
Variable Overhead | 6000 | $ 5.90 | $ 35,414 |
.
Standard DATA for | 10700 | Units | |
Quantity (SQ) | Rate (SR) | Standard Cost | |
[A] | [B] | [A x B] | |
Direct Material | ( 8.5 liters x 10700 Units)=90950 liters | $ 8.10 | $ 736,695.00 |
Direct labor | ( 0.6 hours x 10700 Units)=6420 hours | $ 25.70 | $ 164,994.00 |
Variable Overhead | ( 0.6 hours x 10700 Units)=6420 hours | $ 7.00 | $ 44,940.00 |
.
Material Price Variance | ||||||
( | Standard Rate | - | Actual Rate | ) | x | Actual Quantity |
( | $ 8.10 | - | $ 8.29 | ) | x | 93100 |
-17390 | ||||||
Variance | $ 17,390.00 | Unfavourable-U | ||||
Material Quantity Variance | ||||||
( | Standard Quantity | - | Actual Quantity | ) | x | Standard Rate |
( | 90950 | - | 90960 | ) | x | $ 8.10 |
-81 | ||||||
Variance | $ 81.00 | Unfavourable-U |
.
Labor Rate Variance | ||||||
( | Standard Rate | - | Actual Rate | ) | x | Actual Labor Hours |
( | $ 25.70 | - | $ 26.72 | ) | x | 6000 |
-6102 | ||||||
Variance | $ 6,102.00 | Unfavourable-U | ||||
Labour Efficiency Variance | ||||||
( | Standard Hours | - | Actual Hours | ) | x | Standard Rate |
( | 6420 | - | 6000 | ) | x | $ 25.70 |
10794 | ||||||
Variance | $ 10,794.00 | Favourable-F |
.
Variable Overhead Rate Variance | ||||||
( | Standard Rate | - | Actual Rate | ) | x | Actual Labor Hours |
( | $ 7.00 | - | $ 5.90 | ) | x | 6000 |
$ 6,586.00 | ||||||
Variance | $ 6,586.00 | Favourable-F | ||||
Variable Overhead Efficiency Variance | ||||||
( | Standard Hours | - | Actual Hours | ) | x | Standard Rate |
( | 6420 | - | 6000 | ) | x | $ 7.00 |
$ 2,940.00 | ||||||
Variance | $ 2,940.00 | Favourable-F |