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

Solution a:

Standard quantity of material for actual production = 9700*7.50 = 72750 litre

Actual quantity of material purchase = 75100 litre

Actual quantity of material used = 72770 litre

Standard price of material = $7.10 per litre

Actual price of material = $563,500 / 75100 = $7.50332

Material price variance = (SP - AP) * AQ Purchased = ($7.10 - $7.50332) * 75100 = $30,290 U

Solution b:

Material quantity variance = (SQ - AQ) * SR = (72750 - 72770) * $7.10 = $142 U

Solution c:

Standard hours of direct labor = 9700 * 0.40 = 4850 hours

Standard rate of direct labor = $22.70 per labor hour

Actual hours of direct labor = 4600 hours

Actual rate of direct labor = $110,302 / 4600 = $23.97869 per hour

Direct labor rate variance = (SR - AR) * AH = ($22.70 - $23.97869) * 4600 = $5,882 U

Solution d:

Direct labor efficiency variance = (SH - AH) * SR = (4850 - 4600) * $22.70 = $5,675 F

Solution e:

Standard hours of direct labor = 9700 * 0.50 = 4850 hours

Standard rate of variable overhead = $6 per hour

Actual hours of direct labor = 4600 hours

Actual rate of variable overhead = $23,414 / 4600 = $5.09 per hour

Variable overhead rate variance = (SR - AR) * AH = ($6 - $5.09) * 4600 = $4,186 F

Solution f:

Variable overhead efficiency variance = (SH - AH) * SR = (4850 - 4600) * $6 = $1,500 F