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

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.)

Solutions

Expert Solution

a Material Price Variance $                    29,108 U
b Material Quantity Variance $                          142 U
c Labor rate Variance $                      5,888 U
d Labor efficiency Variance $                      5,675 F
e Variable Overhead rate Variance $                      4,186 F
f Variable Overhead efficiency Variance $                      1,500 F
Workings:
a. Material Price Vaiance $                    29,108 U
Standard Price = $                         7.10
Actual Price = $                5,63,500 /        75,100 = $                 7.50
Actual Quantity of Material used =                        72,770
Material Price Vaiance = (Standard Price-Actual Price)*Actual Quantity
= (7.10-7.50)*72770
= -29108
b. Material Quantity Variance $                          142 U
Working:
Standard Quantity =                           9,700 x             7.50 =                 72,750
Actual Quantity =                 72,770
Standard Price = $                 7.10
Material Quantity Variance = (Standard Quantity-Actual Quantity)*Standard Price
= (72750-72770)*7.10
= -142
c. Labor rate Variance $                      5,888 U
Working:
Standard Labor rate $                      22.70
Actual Labor rate $                1,10,302 /           4,600 = $               23.98
Actual Labor hours                           4,600
Labor rate Variance = (Standard rate-Actual Rate)*Actual Labor hours
= (22.70-23.98)*4600
= -5888
d. Labor efficiency variance $                      5,675 F
Working:
Standard Labor hours =                           9,700 x             0.50 =                   4,850
Actual Direct Labor hours =                           4,600
Standrad Labor rate = $                      22.70
Labor efficiency variance = (Standard Labor hours-Actual Labor hours)*Standard labor rate
= (4850-4600)*22.70
= 5675
e. Variable Overhead Rate Variance $                      4,186 F
Working:
Standard variable overhead rate $                         6.00
Actual Variable Overhead rate $                    23,414 /           4,600 = $                 5.09
Actual Labor hours                   4,600
Variable Overhead Rate Variance = (Standard rate-Actual Rate)*Actual Labor hours
= (6.00-5.09)*4600
= 4186
f. Variable Overhead efficiency variance $          1,500 F
Working:
Standard Labor hours =                           9,700 x             0.50 =                   4,850
Actual Direct Labor hours =                           4,600
Standard Variable Overhead rate = $                         6.00
Variable Overhead efficiency variance = (Standad Labor hours-Actual Labor hours)*Standard variable overhead rate
= (4850-4600)*6.00
= 1500

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