Question

In: Accounting

Kropf Inc. has provided the following data concerning one of the products in its standard cost...

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.)

Solutions

Expert Solution

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

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