Question

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		7.50	liters	$	7.10	per liter
Direct labor		0.50	hours	$	22.70	per hour
Variable manufacturing overhead		0.50	hours	$	6.00	per hour

The company has reported the following actual results for the product for September:

Actual output		9,700	units
Raw materials purchased		75,100	liters
Actual cost of raw materials purchased	$	563,500
Raw materials used in production		72,770	liters
Actual direct labor-hours		4,600	hours
Actual direct labor cost	$	110,302
Actual variable overhead cost	$	23,414

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.)

Answer 1

• All working forms part of the answer
• Actual data and Standard data for 9700 units:

Actual DATA for		9700	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	72770 litres	$              7.50 ]563500/75100]	$       545,775.00
Direct labor	4600 hours	$              23.98 [110302/4600]	$       1,10,302.00
Variable Overhead	4600 hours	$                5.09 [23414/4600]	$           23,414.00
Standard DATA for		9700	units
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	72750 litres [ 9700 x 7.5]	$                7.10	$       5,16,525.00
Direct labor	4850 [9700 x 0.5]	$              22.70	$       1,10,095.00
Variable Overhead	4850 [9700 x 0.5]	$                6.00	$           29,100.00

• Following includes all the variances asked (including spending variances)

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        7.10	-	$                       7.50	)	x	72770
	-29108
	Variance		29108			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	72750	-	72770	)	x	$                           7.10
	-142
	Variance		142			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         5,16,525.00	-	$        5,45,775.00	)
	-29250
	Variance		29250			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     22.70	-	$                    23.98	)	x	4600
	-5882
	Variance		5882			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	4850	-	4600	)	x	$                        22.70
	5675
	Variance		5675			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         1,10,095.00	-	$        1,10,302.00	)
	-207
	Variance		207			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                        6.00	-	$                       5.09	)	x	4600
	4186
	Variance		4186			Favourable-F
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	4850	-	4600	)	x	$                           6.00
	1500
	Variance		1500			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$             29,100.00	-	$            23,414.00	)
	5686
	Variance		5686			Favourable-F