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 |
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.)
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 | ||||||||